Different types of Businesses Budgets 

Main budget  for the business are :

• Master Budget
• Operating Budget
• Cash Flow Budget
• Financial Budget
• Static Budget

Budgets guide the management for  businesses track so they can manage resources. ,Businesses use the variety of budgets for measuring its spending and develop effective strategies for maximization of assets and revenues.

Let us describe in details:

Master Budget
This budget is  aggregate of business’s individual budgets and it is designed to present the complete picture of financial activity and health of the company. Master budget combines the factors like sales, the operating expenses, the assets, and the  income streams for allowing  companies for establishing  goals and evaluate their overall performance, as well as that of the individual cost centers within the organization.

Cash Flow Budget
This budget show how and when cash comes in and flows out from the  business within a specified time period. It is useful in helping the company for determining whether company is  managing its cash wisely. It  consider factors suchlike accounts payable and accounts receivable to assess whether a company has ample cash on hand to continue operating,  extent to which it is using its cash productively, and likelihood of generating the cash in  near future.

For Example:

The construction company, , might use its cash flow budget to determine whether it can start the  new building project before getting the paid for the work it has in progress.

Operating Budget
An operating budget is a forecast and analysis of projected income and expenses over the course of a specified time period. To create an accurate picture, operating budgets must account for factors such as sales, production, labor costs, materials costs, overhead, manufacturing costs, and administrative expenses. Operating budgets are generally created on a weekly, monthly, or yearly basis. A manager might compare these reports month after month to see if a company is overspending on supplies.

Financial Budget
This  budget presents  the company’s strategy for managing its assets, cash flow, income, and expenses. The  financial budget is used  for establishing the picture of a company’s financial health and present a comprehensive overview of its spending relative to revenues from core operations.

Example:

software company, for instance, may  use its financial budget  for determining the value in the context of the public stock offering or merger.

Static Budget
The  static budget is  a fixed budget which remains unaltered regardless of the changes in factors such like sales volume / revenue.

Example:

Spare parts supply company may  have a static budget in place each year for warehousing and storage, regardless of how much the inventory it moves in/out due to the increased or decreased sales.

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