You may be one of the entrepreneurs who set out to develop their project without the slightest knowledge of the economic part that any company implies. Or that you take over the small family business without having the least financial experience. In these cases, you must put the batteries from the first moment to rectify this lack. For starters, nothing more interesting than understanding what an accounting budget is and how to do it well.
It is not our whim, when you understand that your company’s budget is a declaration of intent about what you want your project to be, based on the real data of your capabilities, you will understand its importance. But, better to take a more technical approach to this concept of accounting budgetto learn how to get the most out of it. Image: Rawpixel.com || Shutterstock
What is an accounting budget?
An accounting budget is the document that reflects the operating plan of a company for a determined period of time, normally one year. In simple words, it is a forecast of the results, counting on the different money flows that will move in that limited period. In other words, an accounting budget is the approximate calculation of the income and expenses that will be produced by a specific economic activity.
The importance of establishing this planning resides in the fact that it forces us to evaluate and set the priorities of our company to achieve that basic objective, which is none other than to obtain benefits and move away from deficits . Therefore, its main function is to control business action, taking note of malfunctions or errors to correct them. If everything goes smoothly, it verifies our achievements.
But, always taking into account that a budget in the accounting of a company has a future component, it is not a matter of capturing only the economic data that converge in our business, it reflects a projection of these figures in a future period. It is an administrative document, an irreplaceable exercise in reflection and monitoring of the activity of our company.
Aspects that define an accounting budget
There is, like almost nothing in the business universe, a unique way of budgeting in accounting . Depending on the factor or factors in which the focus is placed, some variations arise. Some of the keys to keep in mind to prepare an accounting budget are:
- The organization chart of the company must appear to reflect the differences between the different areas and to be able to quickly correct the mismatches. If we talk about SMEs, this organization chart should be simple, only with the essential lines of command (clients, treasury, suppliers , creditors and payments receivable)
- Gather current financial information, if necessary with data on the financial status of the last periods. It is about knowing what the real level of income has been and the needs that have been had to cover that production.
- Set the goal for the period of this budget. We have reviewed the past information and studied the behavior of the company with data, now is the time to capture expectations, with a realistic vision that takes into account external factors such as market conditions, macroeconomic data or competition in the sector in which we operate.
- A clear identification of all our sources of income, not only the sale of products or services, but also items such as commissions or shares in capital markets , for example. It is necessary to include the evolution of each one of these incomes in recent years.
- Identify costs and expenses, the so-called uses of money. Here it is important to optimize our resources and minimize costs.
With these basic notions of what an accounting budget is , your company is closer to developing successfully.