30 November 2013
For theory on what's budgeting and etc, refer to a good book. Following are practical tips:-
1) Budget is a replica of your current Financials (not the Statutory reports, but internal Management reports, commonly called MIS). Only difference is it's for future period.
2) Segregate your P&L in few parts. Eg.
a) Sales & Cost of Sales (Plus Production and Purchase volumes). This data is critical to be fixed as soon as possible. Make sure these don't change at later stage. All of the things that will follow are dependent on this.
b) Sales Dependent Values (eg. Commission, Warranty, Discounts, etc.) Mostly, for this you calculate as a %age on Sales.
c) Departmental Expenses (this you will get from Department heads of various functions. This includes Travelling, Telephone, Electricity, etc).
d) Payroll Costs (salary & benefits). This will be a confidential data, because the increments and promotions will also get in here. Keep it Confidential.
e) Inventory, Fixed Assets, Receivables, Payables, etc. These are dependent on Sales, Production and Purchase volumes. They can be calculated as %age or through Increment/Decrease in closing values.
f) The balancing. you will have to do a balancing in some Balance Sheet GL. Also, it should not be a large figure.
Final Key point to note is:- keep in mind that your budget is for comparison with actuals in next month / year. So, keep it in such manner where you can effectively analyse and compare with actuals.
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