Budget Basics

A budget is a plan of what an organisation expects to achieve within a particular period of time, usually one year. Budgets are normally characterised by, estimation of revenues and expenses, expected cash flows and debt reduction. Actual results are compared to the budget to determine variances, that may also be used by management for decisions making.

It is essential that a budget represents an organisation’s financial position, cash flow and objectives. The organisation’s goals & objectives are supported by the budget. In essence, the budget should enable the organisation to reach their objectives.

Usually an organisation’s budgets are reviewed once per year. Some organisations may need to be flexible and allow the budget to be adjusted during the year as economic condition change.