Budget

Meaning

A budget (الموازنة التقديرية) turns a plan into numbers for a period ahead, usually a year split into months. A sales budget estimates what will be sold and at what price; the expense budgets follow from it (purchases, salaries, rent, marketing); a cash budget shows when money will come in and go out, so a shortfall is seen months before it happens; and a capital budget lists the equipment or vehicles to be bought.

A budget is only useful if it is compared with what actually happens. Each month the actual figures are set against it and the differences explained, which is variance analysis. Budgets are also set per project, branch or cost center, so the person responsible for each can see whether it is on track while there is still time to act.

Also called: estimated budget · operating budget · budgeting · الموازنة التقديرية

Example

Al Noor Trading budgets 2027 sales of 3,000,000.00, cost of sales of 2,100,000.00 and operating expenses of 540,000.00, a planned profit of 360,000.00. Its cash budget shows that paying suppliers in January before the Ramadan season's receipts come in leaves the bank 120,000.00 short in February, so it arranges a facility in December.