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Six elements successful operating budgets have in common

by , 29 August 2014
When it comes to controlling the day-to-day expenses of your business, a good operating budget is vital. This is how you'll track, monitor and control your business' expenses.

Get it right and you'll see a number of benefits. Get it wrong and it'll turn into a blueprint for your company's financial disaster.

But how do you tell if your operating budget will be successful. You must look for the six elements that all successful operating budgets have in common. ..

 

Here are the six elements of a successful operating budget

 
1. Sales;
2. Cost of sales;
3. Gross profit;
4. Variable costs;
5. Fixed costs; and
6. Net profit/loss.
 
When you create your cash flow budget, you'll need information about when payments and income actually took place also, not only how much. So it's important to ensure you include these details.
 
You'll draw these elements from your supporting documents and historic results as you prepare your operating budget. 
 
And if your budget has all of these elements, you can reap these seven benefits...
 
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Three accounting record risk areas to watch out for
 
 
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If your operating budget has these six elements you'll reap these seven benefits 

 
1. You'll have greater control of your current operating expenses. You can plan better for production;
 
2. It'll help break annual goals into monthly forecasts for profit and the operating expenses associated with achieving them;
 
3. It'll support your planning by identifying the resources you need and when you need them;
 
5. It'll let employees take part in the budgeting process and enhance their motivation; 
 
6. It'll improve your accuracy when projecting future expenses; and
 
7. You'll be able to make financial decisions with confidence and ensure you move closer towards your goal.
 

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