Sales budget
Sales budget is a recorded estimation of an organizations revenues. Budgets are crucial to organizations because they comprise the projects of revenues from, which an organization plans its activities. If the budgeted sales fail to materialize, the organization is faced with a deficit because it shows that an organization had underestimated its expenses or had an over ambitious expectation budget. A sale budget simply includes the selling price of the organization’s products and services, as well as, the number of units sold. It is the duty of the sales manager to prepare the sales budget, which ensures that all selling activities are directed towards the objectives of such a budget.
Production budget
This type of budget is common in manufacturing entities. The budget lists the desired level of production or capacity in to meet the demand in terms of sales units. Consequentially, the sales budget is the starting point for the production budget. The production budget is crucial for computing the prime cost of the production.
Cash budget
This budget lists the capital requirements or outlay for an organization. It shows the projects that the organization is intending to undertake and the capital requirements for the organization (Finkler, & McHugh, 2008). Cash budget shows all cash inflows and outflows. All non-cash items are deducted because they do not represent flow of cash. Cash budget is very vital in the management and administration of an organization. This budget is also a good tool of evaluating management performance as far as cash management is concerned. For instance, when the surplus cash is huge it shows that the management is not good in investing the organizations cash. Similarly, a deficit in cash shows inefficiency in handling the processes of organization because such deficits can only result from wastage of resources (Finkler, & McHugh, 2008).
Overheads budget
Overhead budgets are a compilation of the organizations indirect costs incurred in the production process. This budget also shows how costs such as fixed costs absorbed or spread in the organization. Indirect overheads are the overheads that cannot be directly traced in the cost of production but were incurred for the purposes of the activities, nonetheless. In order to have supreme control over the costs of an organization, the overheads budget is prepared based on cost centers.
Personnel Budget
This is the budget that compiles the cost of having employee in an organization. The budget is crucial for planning employee compensation because it shows total costs of labor. The budget considers items such as grade of employee, number of employees, labor rate per hour, bonuses and other benefits due to the employee. This budget is crucial in labor management.
Master budget
This budget contains all the budgets discussed above. It is similar to the policy of an organization because it sets the goals of an organization and the assessment of such yearly goals is carried out through the master budget (Finkler, & McHugh, 2008). It is vital for management and policy control in an organization.
References
Finkler, S. A., & McHugh, M. L. (2008). Budgeting concepts for nurse managers. St. Louis, Mo: Saunders/Elsevier.
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