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Not a manufacture? Here's how you can still use a manufacturing overheads budget to save your company money

by , 18 December 2014
Manufacturing operations cost a lot of money, especially when it comes to overheads. This is why a manufacturing overheads budget is so important. Without it, it's difficult to control your general running expenses such as water, electricity and labour.

But what you may not know is you could benefit from a manufacturing overheads budget, even if you're not a manufacturer.

'How' you ask?

Well, all it takes is a bit of simple customising and a little bit of budgeting know-how. Today, I'm going to show you how to do this...

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Ten budget templates to forecast and manage your company's costs
You can use them individually or while you create your operating budget. You'll draw figures from these budgets so you can keep control of costs and maximise profit. Each budget chapter comes with a free Excel budget template for you to customise and use straight away.

Here's how customising a manufacturing overheads budget to fit your budget will help you save money

If you aren't in the manufacturing industry you'll still have to budget for overhead expenses. These can include accounting fees, advertising, insurance, interest, legal fees, salaries, rent, repairs, supplies, taxes, telephone bills, travel expenditures, and utilities.
Those expenses apply whether you're a manufacturer or not. That's why you can benefit from customising your own manufacturing overheads budget. 
But the key is to customise it by only looking at the expenses your business has.
Make sure you know exactly what the overhead costs for your business look like. For example, you may only have labour expenses at certain times of the year when you need to hire people to help you. 
You have to record all the overhead expenses you incur regularly and their amounts. Then record the overheads you occasionally incur. These are also called your fixed and variable expenses.
For example, these are some of the expenses you may incur regularly:
Rent; and
Telephone costs.
And occasional overhead costs may include:
Accountant fees;
Repairs (computers and printers);
Legal fees; and
Travel expenses.
Once you know which expenses make up your overheads you can create your budget. 
Here's how…
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Here's how to create your overheads budget

Step 1: Decide what your sales goals are. If you, for example, want to sell 50 000 units next year, you need to create the budget using that number as your target. 
Look at what fixed and variable expenses you need to incur to sell those 500 000 units. Once you work out your total expenses, divide that amount by 500 000 to show your overhead costs per unit. This is your overhead rate for the year.
Step 2: Put the units you want to sell for each quarter into your budget. 
Step 3: Enter your overhead rate.
Step 4: Times the number of units you want to sell for each quarter with your overhead rate. This will give you your total budget amount for each quarter.
This will help you save money because it stops you spending more than you should in overhead costs on each unit you want to sell. This way, you always make a profit no matter what type of business you're in.
To find out more about manufacturing overhead budgets, as well as another nine types of budgets, check out the Master Budget Series

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