An Exploration Of What Budgeting And Forecasting

1121 WordsAug 16, 20155 Pages
Summary This paper will be an exploration of what budgeting and forecasting are and how they are determined and why they need to be re-evaluated. Furthermore, the hope is to uncover some of the underlining causes that drivers that trigger the re-evaluations in our organization as well as discover ways to mitigate those factors. BackRound Like any other business we need to lower our costs, we apparently have difficulties creating a realistic budget, at least initially, and also have great difficulties with accurately forecasting. Are budgeting problems for new products could be due to the fact that prospective costs on new parts take a while to get properly entered into the system, combine that fact with a 12 month projection, times the…show more content…
It is based on predicted expenses they may be fixed things like rent, leases or variable things such as payroll, utilities and phone bills. Budget list your income and expenses, subtracting one from the other to give you realistic numbers to guide you’re planning. For example, if your budget shows that your total expenses are greater than your total income, you must adjust your spending entries in your budget to try and gain the profit income, you can match it against your payables to make sure that you have enough money in the bank to meet your obligations. You can try to create a budget that only spends what you make by using your current cash position and current sales and expenses to guide you. If this is wrong this it creates a cash flow shortage. Budgeting relies more on recent history, current contracts and income levels to set conservative income limits, as budgeting for income optimistically might not be realistic and set your small project up for failure. A cash flow budget does not show the monthly average amount of your expenses, but the exact expense amounts each month when they come due. This allows you to budget lower payments for discretionary spending in the months when you have high payables. When creating a budget, you set specific spending limits in certain areas based on how much income you have. For example, you might forecast that your payroll will be $100,000 per month, while a budget actually
Open Document