What type of budget

Abc Medium. Abc Large. ThinkStock Photos Depending on the feasibility of these estimates, budgets are of three types -- balanced budget, surplus budget and deficit budget. A government budget is an annual financial statement which outlines the estimated government expenditure and expected government receipts or revenues for the forthcoming fiscal year.

Depending on the feasibility of these estimates, budgets are of three types -- balanced budget, surplus budget and deficit budget. Though an ideal approach to achieve a balanced economy and maintain fiscal discipline, a balanced budget does not ensure financial stability at times of economic depression or deflation.

ETPrime stories of the day Logistics How sustainable supply chains helped companies stay afloat in the pandemic. Subscribe to ETPrime. Browse Companies:. Find this comment offensive? And finally, budgeting can help uncover potentially unhealthy habits like overspending on unnecessary items. So now that we've all acknowledged the various benefits of budgeting right? There are, of course, various options including budgeting, zero-sum budgeting, line-item budgeting, and the envelope system.

Here's a closer look at each approach and why it may or may not be right for you. The approach to budgeting is one of the simplest and most straightforward money management options, ideal for those who want to create a budget but don't have the time or the patience to track their spending in detailed categories.

The benefits of the budget include that it can be a good budget format for beginners , especially for those who are looking to save time or aren't quite sure where to start.

Having just three categories to track may also help you focus on fine-tuning your finances instead of getting bogged down in the process of categorizing each individual expense, says McCreary. As an added bonus, the approach to budgeting can help you feel more comfortable spending money on yourself now and then. On the other hand, a budget may not necessarily be ideal amid the current economic climate, when many of us are still recovering from the financial fallout of the COVID pandemic, or for those whose economic situation is in flux.

Depending on your unique lifestyle, it may make more sense to put more of your income toward needs and savings, versus any wants. The idea behind zero-sum budgeting is to spend every dollar you earn. To be clear however, this does not mean go out and fritter away every single cent. Rather, it means assigning a specific purpose to each dollar you bring in, whether it's savings, expenses, or discretionary spending. Says Brian Walsh, certified financial planner for the personal finance company SoFi.

This category includes the cost of goods or services that can fluctuate based on your business success. For example, let us assume you have a product in the market that is gaining popularity. The next thing you would like to do is manufacture more of that product.

The costs of the raw materials required for production, the distribution channels used for supplying the product, and the production labor will all change when you increase production, so they will all be considered variable expenses. These are one-off, unexpected costs that your business might incur in any given year. Some examples of these costs include replacing broken furniture or purchasing a laptop.

Since it is difficult to predict these expenses, there is no certain way to estimate for them. This is the money that travels in and out of the business. If your business has a peak season and a dry season, knowing when your cash flow is highest will help you plan when to make large purchases or investments.

The final budget component is profit, which is a number you arrive at by subtracting your estimated cost from revenue. An increase in profit means your business is growing, which is a good sign. For example, will you use your profit to invest in advertising or marketing to drive more sales?

A budget is a road map for your business. It helps you predict cash flow, identify functional areas that need improvement, and run your operations smoothly. Creating a budget can get a bit overwhelming for new businesses as there are no previous figures to guide their budget estimates, but with some estimates based on the performance of competitors and an understanding of the components of a budget, you can complete your first budget and have a good road map for future budgets.

This site uses Akismet to reduce spam. Learn how your comment data is processed. Learn More. Guides 5 min read 3 comments. Reading Time: 5 minutes According to a survey conducted by Clutch , 61 percent of small businesses have not created a formal budget. Based on the marketing budget, the department plans a certain number of marketing events and other activities to perform in the following fiscal year.

A fixed budget consists of the revenue and expenses that remain unchanged over a certain period, involving warehouse costs, supply costs, maintenance costs, and more. It is convenient for setting goals that are independent of money. Usually, educational establishments, NGOs, and government institutions use the fixed budget to allocate it for certain activities. In this way, the master budget establishes and maintains relations among departments. And the larger the organization, the more importance is attached to this type of budget.

For example, the organization is large and has multiple divisions and even branches. The profits are divided by specific equal periods, such as months or quarters.

Moreover, this budget type helps to see how profitable a particular division is. On the other hand, smaller organizations may create the master budget in the form of a spreadsheet or replace it with software solutions for budgeting to prevent or, at least, minimize errors. A budget defines your roadmap. It helps you predict your money flow and detect areas that need improvement. Success is never-stopping work that requires you to invest much time and effort into planning and creating budgets.

Budget planning is a good way to evaluate your current performance, see where you are, and how well you achieve your goals. With all these data, you will have better chances to create a good first budget as a good start to your ventures.

This network brings together treasury and financial professionals who manage treasury functions. Members share a common interest in treasury, cash management, banking, risk management and investments.

Dominic Banguis. Sean Salloux.