Budget — Microsoft Excel

Section F

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In this article, we will walk you through the fantastic journey of learning budget in finance using excel. Budget helps understand the plan of revenue and related expenses as well as the inflows and outflows of cash with the consideration of debt repayment and such. Many companies don’t create their budget but without a budget, we cannot understand how our business is performing. With the right budget plan, we can

maintain our business well. So, we will learn how to create a budget in this particular section.

Budget

There are several types of budgets, like business budget corporate budget, individual budget and government budget, but we are learning Excel for accounting

and finance, so we will focus on business budget.
Business Budget is an overview of our business plans. It identifies the status of

our business and future goals and it is the key to make the right decision for our business.

A budget is a plan of prediction of revenue and estimation of expenses over a specified future period and is usually compiled and re-evaluated on a periodic basis. It identifies our available capital, estimates our spending and helps us predict revenue.
A budget helps us in important business decisions like cost cutting, where is

possible, identifying unwanted expenses and buying new equipment. It also helps

us keep out of debt, or take lesser debt and helps us understand how to reduce our ongoing debt.

We can track our progress with the help of an analysis between actual and planned. It helps tackle short term problems and aids long term planning. Budget is required for both start up companies and established ones.

Procedure To Create a Small Business Budget

Let’s understand how to create a business budget with the steps listed below.

1. Identify Revenue: First of all, we need to identify how much revenue we are generating and make the prediction on the current basis for future revenue.
2. Determining Fixed Cost: Every business has fixed costs like rent, certain utilities, payroll, we need to add these in our budget.
3. Determine Variable Costs: Just like fixed costs, every business has some variable costs that add when making an estimation on the basis of current state, for example, costs like travel, freight and electricity.
4. Identify One time Cost: One time costs affect a planned budget the most, because we always don’t consider these in our budget or forget to add them. Some expenses are regular, like fixed and variable costs, but some expenses
   
   happen occasionally, so we must remember them, for example, purchase of new equipment or repairing or replacing an old machine.
5. Put all together: Now, add all revenue and less all cost from the sum to evaluate the final figure of future profit.

Conclusion

Finally, we will walk you through the core concept of budget in finance and along with that approach we also understanding how we create a budget in a corporate company and also discussing how it important for us.