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When people think of budgeting, they frequently think of one expenditure budget for the organization to control its outgoings. There are several types of budget, however, of which expenditure budgets are only one type. You can have a budget for any type of activity, and this article will give you a quick outline of the main types of budgets.
Sales Budget
A sales budget tells you how much of your product/service you will sell or deliver over a given period. This type of budget may include details such as cash/credit sales split, show how much of each type of product/service is sold, etc. It may also include a breakdown of the costs directly related to making those sales, e.g. cost of packaging or sales team travel allowance.
Project Budget
This type of budget sets out how much money you are going to spend on the resources involved in a particular project, i.e. labor, materials, and equipment.
Departmental/Team Budget
A departmental/team budget details how much can be spent (within a particular period of time) on various resources in order for a department/team to carry out its day-to-day functions and achieve its objectives, e.g. team payroll costs, training and development, material and equipment, overheads, general running costs, etc.
Production Budget
This details how much will be produced in a given time period and how much it will cost to produce this volume of products/services.
Capital Expenditure Budget
This type of budget gives you an idea of how much you will need to spend on capital items, such as equipment, for your team. As large items like this are likely to be relatively expensive, this budget enables you to think about what items may need to be replaced as they are getting old or what different types of things you may need this year that you haven’t used in the past.
Cash Budgets
There may be certain times of the year when more money will be needed for expenditure or more sales will be made. A cash budget gets you to map out your likely cash flow for the period ahead and helps you plan your activities around that cash profile.
Profit and Loss Budget
This is a plan of how much profit you will make given a certain level of revenue and expenditure. If you are aiming to make a profit, you will need to know that your predicted sales more than cover your predicted expenditure.
Stock Budget
Stock comprises three things: raw materials, work-in-progress, and finished goods. These are all things that will eventually go into the product that will be sold to your customers. A stock budget will help you plan how much stock you should have on the premises at any one time according to your predicted customer demand and speed of production.
Credit Control Budget
If your organization makes credit sales, it will need a credit control budget. This allows the cash that is coming in from customers to be tracked against the credit period they have been given.
The basic premise of all these individual budgets will stay the same no matter where they are used. However, different types of organizations will adopt different formats, so they won’t always have the same layout.
