An Operating Budget is a detailed financial plan that estimates the income and expenses required for day-to-day operations of a business or organization over a specific period, typically a fiscal year. It includes revenues, costs of goods sold, operating expenses like salaries, utilities, and marketing, and helps management control costs, forecast profitability, and allocate resources efficiently.
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Key Facts
- Purpose: Provides a roadmap for managing regular business activities and expenses.
- Components: Includes projected revenues, fixed and variable costs, and operating expenses.
- Timeframe: Usually prepared annually but may be updated quarterly or monthly.
- Use: Helps track financial performance and guide decision-making.
- Relation: Different from capital budgets, which cover long-term investments and assets.
1. What is included in an operating budget?
Projected revenues, salaries, utilities, rent, supplies, and other day-to-day expenses.
2. How is an operating budget different from a capital budget?
Operating budgets cover daily expenses; capital budgets focus on long-term investments.
3. Why is an operating budget important?
It helps control costs, forecast profits, and plan resource allocation.
4. Who is responsible for preparing the operating budget?
Typically finance teams with input from department managers and executives.
5. How often should an operating budget be reviewed?
At least quarterly, but monthly reviews are common for accuracy.
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