What is budget planning and how do you handle it step-by-step?

Hi Karmel,

Budget planning can be a subject by itself.

First and foremost budget by itself is a form of planning i.e. the plan for spending and earning in the form of expenses and revenue.

The budget may be broken down into several parts i.e. capital expenditure, operational expenses and revenue.

For each of the items, you may need to identify the needs and requirement of the items and also the timing of its occurrence.

The identification of the needs and requirement will provide you with the justification for the items that you want to include into the budget.

A good budget will at the minimum be a balanced budget where the total expenditure and revenue tallies, and will be much better if the revenue exceeds the expenditure.

Nonetheless, a deficit budget that is traced to spending on capital items may be still be considered as acceptable provided that you have enough cash flow from previous period or elsewhere. This is especially when the capital expenditure will actually provide you with better income generation capacity or will improve your operating condition.

Once the items had been compiled, you may set a period for budget monitoring in ensuring the actual operating condition follows the budget. Typically this may be set on a monthly, quarterly or every half yearly. The monitoring will provide you with a good indicator on the performance of your company financials. It will also provide you with a good basis when considering new projects or even when applying for financial assistance from banks etc.

As a whole, budget planning will provide stability to your overall business planning and considerations.

Thanks for the invitation. Follower.