Budget
A financial plan estimating income and expenses.
A budget is a financial plan that projects income and expenses for a future period, typically a month, quarter, or year. It serves as a benchmark for evaluating actual performance, controlling spending, and allocating resources. Budgets can be top-down (leadership sets targets) or bottom-up (departments submit estimates). Variance analysis compares actual results to the budget.
Example
A small business creates an annual budget projecting $500,000 in revenue and $420,000 in expenses, then compares actual results monthly to identify where spending exceeds or falls below plan.
Why It Matters for Your Business
A budget is your financial roadmap—without one, spending decisions are made reactively, and you won't know if you're on track until it's too late.
Practical Tips
- •Start with last year's actual numbers as the baseline for next year's budget.
- •Build in a contingency line (5–10% of total expenses) for unexpected costs.
Related Terms
More Business Terms
Accounts Reconciliation
Ensuring account balances match between different records.
Break-Even Point
The sales volume at which revenue equals costs.
Financial Forecast
A prediction of future financial performance.
Capital Expenditure
Funds used to acquire or upgrade physical assets.
Financial Statements
Reports summarizing financial performance and position.
Related Financial Guides & Resources
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