A good operating budget should include a projection of future expenses. Furthermore, an operation budget also shows the expenses for an upcoming period. These expenses include the raw material purchases, processing costs, interests on loans, administrative expenses, maintenance of the office, and salary of the staff. Moreover, when preparing the operating budget, it is important to consider several factors. These factors include the past trend in sales, changes in tax laws as well as government regulations. It also includes the overall economy, and past trends in the purchase price of raw materials. Additionally, a business first develops a sales and income budget before creating the operating budget.
THE BENEFITS OF A GOOD OPERATING BUDGET
A good operating budget helps in managing the current expenses of a business. Moreover, the development of an operating budget involves tracking the operating expenses hence enabling a business to identify areas of considerable savings. Consequently, this eases some financial strain and benefits the total budget. Furthermore, the creation of an operating budget involves an evaluation of the past and present expenses to help in the projection of future expenses. It is also crucial to consider the overall economy and previous budgets. Additionally, an operating budget should align the actual needs of the business
THE BENEFITS OF PROJECTION OF FUTURE EXPENSES
Projection of future expenses provides a view of the economic status of a business and the path it is likely to take in the future. Moreover, it involves an analysis of the overall economy to prepare for expenses and revenue basing on the demand and supply pattern in the market. This information is essential in the preparation of a good operating budget. Furthermore, it helps a business to set up a point of achievement to ensure that it is growing according to the projections. Resultantly, this assists in the establishment of goals by developing commitments for long-term success.