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Budget Estimates and Cost Planning are connected. The later depends on the first. A budget estimate is an approximation of the cost of the activity or a project, program, or a job prepared for budgeting and planning purposes. It is not accurate enough to serve as a basis for firm commitment. It represents the budget maker's understanding of the scope of expenses and what needs to be done. Cost Planning will tell how much is the cost of a certain project, activity, program, or a job and when the expected expenses will occur. Therefore; Cost Planning will be based on the Budget Estimates.
Cost planning is a procedure from the concept to the practical completion on the construction site, containing several staged estimates. For example, Brief stage (indicative) cost estimate; outline proposal (preliminary) cost estimate; Sketch design cost estimate; tender (construction drawings) cost estimate etc. All estimates are developed step by step whilst the design moves forward.
As the revenue management culture grows, initiatives to truly maximizeprofit from all angles can be considered. For example, if it could be established that the typical profit from ancillary revenue streams (F&B, resortactivities, etc.) of demand from a particular company or channel weregreater than those from other companies or channels paying similar rates,when demand is high, strategies to ensure that preference is given to thedemand that will capture the most profit can be put into place. This mayseem to be a very logical step to make; however, putting this systematicallyinto practice requires upfront investment in capturing revenue and profitdata by channel/market segment/demand stream, and then using
Budget estimates means estimated/target revenue for the budgeting period set by the management. Cost planning includes the epense limit for the year to achieve expected EBITDA & EBITDA percentage.
Budget estimates serves the purpose of the cost that is forecasted from scratch till end of the Project incorpoarting the changes during the different phases of the project with reference to revenue vs cost. and the cost planning is strategic approach in delivering within the time inline with the framed budget estimate.
The objective of business is to "GAIN". Budget estimates and cost planning are proven financial tools, helping business "gains".
Considering the level of activities and expansion plans, the business execution stretagies are to be determined. This stretagy needs to be devided into various activities. It further needs to allocate estamated cost to perform these activities. This forms a budget for specific business stretagy.
Business stretagy and budget are inter related. When budget is a constraint, stretagy needs to be fitted within budget and when the execution stretagy is more important then budget then budget is to be fixed considering stretagy.
Actual cost will be compared with budget to find variances and analysis would be used to prepare more effective budget.
In simple terms budget estimates must consider q cost planning model in order to maintain a vialble budget. Cost must be examined IAW the local markets and budgets must hold target revenue forecast.
Budget estimate: Simply means, it is an approximation of the cost of an activity and prepared only for budgeting & planning purpose. it is not accurate enough to provide a basis for a firm commitment.
cost planning: prepared and used for controll over the cost by analysing previous experience.
Budget Estimate refers to the spends expected during the period of budgeting for the next year which reflects moreover the actual spend during that budgetory year.
Budget planning is the full year budget what is prepared for full year.
Budget Estimates provides the required target to accomplish. To achieve the target effectively needs cost planning so that the achievement will provide the suitable result. both are a step by step procedure. cost planning will be started simultaneously along with budgeting. so that while budgeting itself will provide the best way achieving a targeted result.
the cost planning must be analyzed before preparing buget where it's depend on how much the organization will investe in IT , also budject is a capex and opex but cost planning refere to opreation expenss mainly not IT asset .
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