Inaccurate Company Budget

The operating budget provides financial information regarding anticipating revenue and anticipated expenses. These revenues and expenses reflect the anticipated revenue and expenses for the next year of the company’s operations and shows the companies working budget. It generally shows several different budgets as well. The operating budget is an estimation of all the income and expenses that are forecasted for the company that show as revenue. The operating budget is considered to be a short-term budget, usually lasting during a period of a year. Anything that would be considered a projected budget for the long-term would be excluded. There are two divisions for a company’s budget; the operating budget and capital budget. The capital …show more content…
If a manager is working with a bad inaccurate budget, it can lead to making decisions, which could be a serious detriment to an organization. An example of an inaccurate budget would be if a company decides that the only way they’ll be able to meet their financial goals is to downsize the company. Then after downsizing employees, the company’s work load only increases, but the budget remains the same. This example shows an ineffective operational budget. The budget should be based on planning concepts that help the company grow. Different organizations have different goals or objectives that the company thinks is important. So these different organizations have different views about how an operating budget should work or look like, along with what they think is effective methods and ineffective methods. Managers use these budgets as a way to forecast costs and expenses in order to carry about plans of the …show more content…
Most companies have multiple budgets, because they deal with a variety of different things in the organization. The main elements to the budgeting process is planning and budgeting before production, managers overseeing production and operations during the month or throughout the year, and monitoring month end budgets compared to actual analysis on how the company actually faired at the end of the reporting period. The planning of the production is one of the elements of an operation budget and assesses how many units of the product that needs to be manufactured and how many man hours are required to make it happen. It is a sales forecast, or what the company sees as being made as a profit. The inventory is taken a head of time, evaluating how much stock is on hand, and a plan is developed by management. Preparing a sales budget could be difficult and time consuming, because there are going to be many people in the organization that require input. How they prepare the operational budget for sales is up to management. Like previously discussed, the budget can be broken down monthly, yearly, or