So what does a budget look like? There are numerous variations, but the goal of any budget is to clearly communicate revenue and cost centers so that profit statements can be drafted and management of resources, including income, can be better accomplished. To that degree, all budgets tend to look the same.
For the sake of this lesson, let’s assume our unit maker described earlier has been in business several years and is charged with budgeting for next year. That means he will have budgets from previous years from which to draft future business plans. The operational budget, then, likely will break revenue and expense components down to three columns:
1. The current year’s budget, or what he originally projected his income and expenses to be.
2. The current year’s projected year-end actual expenses and revenues. Even if it’s a guess, which it tends to be, it must be as accurate a guess as possible.
3. The next year’s budget, which tends to be a hybrid between the actual budget, the year-end projected actuals, and a best guess for what the new year will bring.