Financial modelling terms explained

Operating Budget

An operating budget is a type of budget that tracks the income and expenses of a business over a specific period of time

What Is an Operating Budget?

An operating budget is a budget that outlines a company's estimated expenses and revenue for a specific period of time. An operating budget is typically used to track a company's performance against its planned budget and to make necessary adjustments. An operating budget can be used for any time period, but is most often used on a monthly or quarterly basis.

How Do You Create an Operating Budget?

The first step in creating an operating budget is to gather information about your company's past spending. This will give you a good starting point for estimating future spending. You'll also need to estimate your company's revenue for the upcoming year. Once you have both of these figures, you can start creating your budget.

The next step is to break down your company's spending into categories. This might include things like marketing, employee salaries, rent, and utilities. Once you have all of your spending categories, you can estimate how much you'll need to spend in each category.

Once you have your spending estimates, you can start allocating your revenue. This will tell you how much money you have to work with each month. You can then use this information to create a budget for each month of the year.

Finally, you'll need to create a summary of your budget. This will include your total revenue and spending for the year, as well as your estimated profit or loss.

What's the Difference Between an Operating Budget and a Capital Budget?

An operating budget is a plan for how a company will generate and spend its revenue and expenses over a specific period of time. This budget typically covers a one-year period, and it can be used to track actual results against planned results. An operating budget can be used to make decisions about things like pricing, hiring, and marketing.

A capital budget is a plan for how a company will invest and spend its money over a specific period of time. This budget typically covers a one-year period, and it can be used to track actual results against planned results. A capital budget can be used to make decisions about things like buying new equipment or expanding into new markets.

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