What Are Factors To Consider When Preparing A Budget?

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Sam Easterbrook Profile
Sam Easterbrook answered
The answer to this very much depends on who you are preparing the budget for, and the complexity of the organisation involved. A family budget is a very different thing to a corporate budget, which in turn is very different to, say, a national infrastructure budget.

However, in very broad terms, there are a number of fundamentals to keep in mind when preparing any sort of budget:

Incomings - Resources that you will be getting in, and from which you expect to pay.

Outgoings - The numerous weekly or monthly demands on your finances.

Timing and deadlines - It is crucial to know when you are receiving money in, and when it is due to go out.

Saved resources - Resources which can be called upon to help in times of need, and which must be added to in times of plenty.

Interest and penalties - Interest could be gained on saved resources, or paid out on resources borrowed. Penalties might apply should you need to borrow from resources, or other sources of income, in contravention of agreed terms.

Essentially the art of preparing a useful budget is keeping all these factors in balance, - knowing how much you are getting in, and when it is coming, knowing how much you will be paying out, and when it will be due. Understanding how much you can use from saved resources, and how much of the balance of your income you could afford to add to your saved resources going forward, and whether you will accrue or incur interest, or additional penalties, for any of these actions are all important elements.

By keeping all these factors in balance, you should be able to maintain a healthy economic profile, increase your opportunities for credit and ensure your ability to afford whatever you need within the scope of your income.
Anonymous Profile
Anonymous answered
First you will want to identify all your liabilities. Then you will want to quantify them by volatility.

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Anonymous