Overview
Budgeting is a process where an organization creates a forward looking financial statement for the purposes of planning. The statement is designed to be something of a forecast of what the financials will look like, but sometimes is designed to be more of a target than a forecast.
Top Level Expense Categories
Firms generally have two large categories of expenses:
- Operational Expenses (OPEX) - these are the expenses required to run current operations, with possibly maintenance expenses.
- Capital Expenditures (CAPEX) - expenses that are typically large and of an investment nature.
Starting Budget
When budgeting, there are generally two different starting points from which to begin.
- Last Years Budget - often provides the ideal starting point for this years budget. In particular, one can start with last years budget, and then just make adjustments to the expenses that are forecasted to have changed. In particular, one should account for inflation in your budget forecasts.
- Project Plan -
if the budget being created is for a new project, then you will not have any relevant data to look back to.
In this case, it is best to create a project plan that indicates the resources required and timing. From this plan,
you should be able to create a first pass of the budget.
If the project being budgeted is similar in nature to projects that have gone before, these past projects may provide a baseline from which to budget the new project.
Sample Budget Data
Budget data can come in any of a number of formats. A simple format is a table with two columns, an account name or id, and a value.
Consider the following budget data:
This data can be saved in text format as JSON. (see Tabular Data) which would look like the following:
[{"name":"equipment leases", value:2000}, {"name":"equipment repair", value:100}]