Any and all companies need good financial planning to be able to sustain themselves in the market. To help with this challenge, there are several types of corporate budget that have as main function to allow the company to control over financial resources.
Due to the different types of business budget, companies choose the one that best suits their needs and particularities. We can highlight among the types of business budget, the flexible, fixed, continuous and adjusted budget.
Each determines a series of distinct objectives and offers advantages in its implementation. In this article we will bring 7 types of business budget and talk about the differences between them. Check out!
Business budgets: Meet 7 types
Every company has its needs and obligations. However, one point is crucial for all, whether small, medium or large on the market, this is the business budget.
Through it, the company has greater control over its financial scenario and is able to not only analyze its present more assertively, but also predict the future. Following a line where financial health is the main basis of this planning.
There are countless types of business budget and in this article we list 7 of them for you to know and choose the one that most identifies with the financial reality of your company.
- static budget;
- variable budget;
- continuous budget;
- adjusted budget;
- zero base budget;
- strategic planning budget;
- incremental budget.
Check below the main differences between these types of business budget and their advantages.
Among the types of business budget, static is one that does not change during the process. What is initially defined in resources is strictly followed until the end, without changes until the next budget planning.
It is commonly used in administrative functions for small businesses. And its main premise is to be aimed at just one activity or action.
In the types of business budget it is chosen, as it allows the company a quick perception of possible errors. Facilitating corrections and contributing to more assertive and targeted decisions.
The fixed budget appeared in Germany in the 70s and can be used in any area of the organization, regardless of its activity.
It is one of the types of business budget that is closely linked to variable and fixed costs organization so that it can be built.
Thus, the company has greater and broader control over the business. Being able to better predict the costs of the most varied activities of the company.
In the variable budget, the organization is able to program itself for any type of mismatch and carry out its budget more effectively. Since you can calculate the production of your machinery, employees and computers.
In the types of business budget, the continuum is normally done to cover one year within the planning. However, it allows for a constant review of the business plan, either monthly, quarterly or half-yearly.
Thus, it is possible to measure what has been working and what has not, allowing adjustments and changes in the company’s budget throughout the process, according to your needs.
It is widely used by companies that invariably need quick decision making and the projection of new budgets based on results.
Within the characteristics of the types of business budget, we have the adjusted budget, which stands out mainly for its high degree of flexibility related to changes.
Like the ongoing budget, the company closely monitors what gives a profit and what gives an expense, and everything becomes subject to change when necessary.
Normally, reviews take place on a monthly basis which allows changes to the original and original budget.
The zero-based budget takes more time to prepare. This is because it starts literally from scratch, with new goals and objectives, leaving aside historical data.
For this reason, it is widely used in cases of company restructuring. Budgets are based on the likely expenses for all future projects, processes and activities.
Projects that are outside the planning and objectives predetermined by the company are also eliminated.
Strategic planning budget
Regarding the types of business budget, strategic planning is the one that defines the entire structure for the construction of the annual budget. This reduces the risks and makes the wrong decisions.
In view of the strategic planning budget, several scenarios are put into discussion so that any possibility can be envisioned and analyzed.
Whether to measure the creation of new products, opening new units of the company, projecting the consequences of each of the decisions. Normally, through it, the company is able to set goals and clearer objectives for each sector.
If the zero-based budget does not use historical and old data, the incremental budget do the opposite. It relies on an analysis of data from previous periods to create future projections.
As the incremental budget aligns with the objectives of the management, detailed data for each area is not required. Thus allowing greater speed and agility in the construction of this budget model.
Another point to be highlighted is that managers also do not fully engage in the process, since it is a determined area who will have the decision power to approve or disapprove the budget.
That way, managers have more time to dedicate themselves to the goals that fit in their area. This model is widely used by companies that are starting budget planning. He is considered simple and easy to be planned and executed.
Budget planning and company success
A company’s budget planning is crucial to success. Organizations that plan are able to not only organize their present, but also predict the future.
It is extremely necessary that in the face of so many types of business budget, companies define a model to follow. This is because having a base makes it easier to organize the step by step for the growth of the organization.
And we know that each step depends on a constant financial assessment of costs, expenses and investment possibilities.
Within the types of business budget the company can have a more macro view of what is happening and mainly be more assertive in its budgetary decisions.
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