Budgets

The budget is called the anticipated calculation of income and expenses of

an economic activity (personal, family, a business, a company, a
office) for a period, usually annually. It is a plan of
action aimed at achieving a planned goal, expressed in values and
financial terms that must be fulfilled within a certain time and under
certain stipulated conditions, this concept applies to each center of
responsibility of the organization. The budget is the instrument of
annual development of companies or institutions whose plans and programs
they are formulated for a term of one year.
Preparing a budget allows companies, governments, the
private organizations or families to set priorities and evaluate the
achievement of their objectives. To reach these ends, it may be necessary
to incur a deficit (where expenses exceed income) or, on the contrary,
it may be possible to save, in which case the budget will present a
surplus (income exceeds expenses).
In the field of commerce, a budget is also a document or report.
which details the cost that a service will have in case it is carried out. The one
the budget must be adhered to, and it cannot be changed if the client
accepts the service.
Functions of budgets
The main function of budgets is related to Control.
financial of the organization.
Budget control is the process of discovering what is being
doing, comparing the results with your budgeted data
corresponding to verify the achievements or remedy the differences.
Budgets can play both preventive and
correctives within the organization.
These 3 functions are the most important when speaking in general terms.

Budgets are useful in most organizations such as:

utilitarians (business companies), non-utilitarians (agencies)
governmental), large (multinationals, conglomerates) and small
companies.
Budgets are important because they help to minimize risk in
the operations of the organization.
Through the budgets, the operations plan is maintained.
company within reasonable limits.
They serve as a mechanism for the review of policies and strategies of the
company and direct them towards what is truly being sought.
They quantify in financial terms the various components of their plan.
total action.
The budget items serve as guides during execution
staff programs in a specific period, and serve as a standard of
comparison once the plans and programs have been completed.
The procedures lead the advisory specialists to think about the
total needs of companies, and to focus on planning so that
can be assigned to the various components and alternatives their importance
necessary.
Budgets serve as a means of communication between units.
specific level and vertically among executives from one level to another. A
budget estimation networks filter upwards through
successive levels for its further analysis.
The gaps, duplications, or overlaps can be detected and
treated at the moment when managers observe their behavior in
relationship with the development of the budget.
Uses of the budget
The budget is an important tool as a norm, used as
administrative means of proper determination of capital, costs and
necessary income in an organization, as well as the proper use of
the available resources according to the needs of each one of the
units and/or departments. This instrument also serves as assistance for
the determination of goals that are comparable over time,
thus coordinating the activities of the departments towards the achievement of
these, avoiding unnecessary costs and misallocation of resources. Similarly
way allows management to know the performance of the
company, through the comparison of actual facts and figures with the
facts and budgeted and/or projected figures to be able to take measures
that allow for correcting or improving organizational performance and greatly helps
measure for decision making.
A budget for any person, company, or government is a plan to
spending action for a future period, usually of one year, from
disposable income. A calendar year for a government is referred to as
fiscal year
The budgeting process in organizations
The budgeting process tends to reflect in a quantitative way,
through the budgets, the objectives set by the company in the short term
deadline, through the establishment of the appropriate programs, without losing
the long-term perspective, since it will condition the plans that
they will allow the achievement of the ultimate goal to which management is directed
company.
• Definition and transmission of the general guidelines to those responsible for
the preparation of the budgets
Development of plans, programs, and budgets
Negotiation of the budgets:
Coordination of budgets:
Approval of the budgets:
Monitoring and updating of the budgets;
Classification of budgets
Budgets can be classified from various points of view. A
The following presents a classification according to its aspects.
outstanding:
According to flexibility
Rigid, static, fixed or assigned:
Sometimes referred to as static budget, it consists of a single plan and
does not make reservations for changes that may occur during the period
for which it has been made. It is fundamentally based on that the
forecasts estimates are correct. For example: If the
The presented budget corresponds to a fixed budget. It includes
an estimate of the quarterly and annual production of the factory of
manufacturing and, also, sales for those periods. It is not done
no forecast to consider possible changes in the figures of
production or in sales estimates as a result of changes in
the economic situation of the country, of rising prices of raw materials
cousins, etc. That is to say, it is considered that no change will occur. In the
in the case of a country whose economy is not stable, fixed budgets are not
the most recommended, unless they cover a period of time
relatively short. Another example: The weavers can make a
fixed budget for a quarter, as it is quite likely that during
during this period, the price of wool does not rise.
However, while it is true that we can have some certainty in
As for the cost of the polo shirts, their sale presents more difficulties.
The demand for this item is a variable that the weavers do not control.
and it can undergo quite serious changes. It is likely that there will be greater
demand during the months of autumn and winter than in spring and summer.
Moreover, it is subject to the purchasing power that women have.
population that, if there are difficult moments, will eliminate or postpone their
acquisition. Therefore, establish an estimation of 100 polo shirts
sold each month is risky, as the reasons that determine this
demand is harder to estimate and predict.
From this, we can conclude that fixed budgets are more
suitable for those operations in which the items involved do not
they have many variations, such as the costs of certain
raw materials whose prices are fixed, the salaries and wages that are assumed
they remain constant throughout the duration of the collective contract.
They can also be used when forecasts about the future of the
companies are highly reliable. For example, the schools that have a
more or less fixed enrollment, the hospitals, whose demand is more or less
calculated. But they could not be used, for example, in an agricultural fund, since
that the forecasts about the harvest results are not always
reliable. They are subject to many contingencies that make the
the result can sometimes be unpredictable.

• Flexible or variable.
They are made for different levels of activity and can be
adapt to the changing circumstances of the environment. They are of great
acceptance in the modern budgetary field. They are dynamic
adaptable, but complicated and costly. They are the budgets that
they are developed for different levels of activity and can be adapted to the
circumstances that arise at any moment. These show the
revenues, costs, and expenses adjusted to the size of operations
manufacturers or commercial. They have a wide application in the field
budgetary costs, indirect manufacturing expenses,
administrative and sales.
The flexible budget is prepared for different levels of operation,
providing projected information for different volumes of the variables
criticisms, especially those that constitute a restriction or factor
conditional.
Its characteristic is that it avoids the rigidity of the master budget - static -
which implies a fixed level of work, transforming it into an instrument
dynamic with various levels of operation to understand the impact on the
predicted results of each activity range, as a consequence of
the different reactions of costs in response to them. This means that they
manufactures for a certain volume interval between a
minimum and another higher one, given by the maximum level of activity of the
company
According to the period they cover
And likewise taking into account the determination of the period that will be covered
The budgets will depend on the type of operations that the Company carries out.
and with the greatest or least accuracy and detail desired, since the more
time will correspond to a lower accuracy and analysis. Thus, they may
budget news:
In the short term:
They are the ones carried out to cover the planning of the organization in the
annual operating cycle. This system adapts to countries with
inflationary economies.
In the long term: as much as possible
These types of budgets correspond to the development plans that,
generally, states and large companies adopt.
According to the scope of applicability in the company
master budget
intermediate budgets
operating budgets
investment budgets
Sales budget
It is the sales forecast of the company that they prioritize.
determine the level of projected actual sales by a company, this calculation
It is carried out using current and future demand data.
Motivation research
Special market research techniques have been developed, which are
they call it motivation research, to measure customer motivation.
This approach relies heavily on behavioral sciences.
particularly from psychology, sociology, and anthropology.
Many companies require their salespeople to prepare estimates.
annual sales of the products, as they are more familiar with the conditions
locales and the potential of customers.
Observations
The foundation on which the sales budget and other parts rest
of the master budget, it is the sales forecast, if this forecast has
have been carefully and accurately developed, the following steps in the
the budgeting process would be much more reliable, for example: The
Sales forecast provides the expenses to prepare the budgets

production
purchases
sales expenses
administrative expenses
The sales forecast begins with the preparation of estimates for
sale, carried out by each of the sellers, then these estimates
sent to each unit manager. The preparation of a budget for
sale begins with a basic that has various lines of products for a
same sector which is projected as a sales forecast for each
quarter.
Production budget
They are estimates that are closely related to the
sales budget and the desired inventory levels. In reality the
production budget is the projected sales budget and
adjusted for the change in inventory, first it is necessary to determine if the
company can produce the quantities projected by the budget of
sale, with the aim of avoiding an excessive cost in labor
busy.
Process
Labor budget (PMO)
It is the required diagnosis to have a diversity of factors.
human capable of meeting the requirements of planned production. The
indirect labor is included in the indirect cost budget of
manufacturing, it is essential that the person in charge of the staff does
distribute according to the different stages of the production process for
allow a 100% use of each worker's capacity.
Components
diverse personal
number of hours required
unit hourly rate
Manufacturing expenditure budget
They are estimated directly or indirectly to intervene in the entire stage.
of the production process, are expenses that must be charged to the cost of
product. It is important to consider a budget of expenses of
Maintenance, which also impacts manufacturing costs.
Sustentation
man-hours required
operability of machines and equipment
stock of accessories and lubricants
Observations
This budget must be coordinated with the previous budgets for
avoid an unnecessary expense that cannot be reversed later...
Cost production budget
They are estimates that specifically intervene in the entire process of
unit production of a product means that from the total of
The budget for the material requirement must calculate the quantity.
required by type of line produced which must match the
production budget.
Characteristics
Only the materials required for each line should be considered or
mold.
The cost must be estimated.
Not everyone requires the same materials.
The value must match the unit cost established in the cost of
production.
Material Requirements Budget (MRB)
These are calculations for purchasing materials prepared under normal conditions.
of production, as long as there is no shortage of materials this
allows the amount to be fixed on a certain standard for
each type of product as well as the budgeted amount for each line,
must respond to production requirements, the department of
purchases must prepare the program that matches the budget of
production, if there is a need for a greater requirement it will be taken into account
flexibility of the first budget for a timely expansion and thus
meet the production requirements. It is important to verify the
variations of international markets, to find the best point
of purchase.
Sales Expense Budget (SEB)
It is the budget with the greatest caution in its management due to the expenses that
it causes and its influence on financial spending. It is considered as
projected estimates that arise during the entire process of
marketing to ensure the placement and acquisition of it in the
consumer markets.
Characteristics
It includes all the marketing.
It is the basis for calculating the profit margin.
It is permanent and expensive.
Ensures the placement of a product.
Expands the consumer market.
It is done at all costs.
Disadvantages
It does not generate profitability.
It can be misused.
Does not consider unforeseen events.
Financial imbalance
Administrative Expenditure Budget (PGA)
Considering it as the core part of the entire budget because it is allocated
most of it; they are estimates that cover the need
immediate need for all types of personnel for its different units,
looking to make the system operational. It should be as austere as possible without
that it implies a delay in the management of the plans and programs of the
company.
Characteristics
Salaries are set according to the economic reality of the company and
not in parallel with inflation.
They are indirect expenses. They are expenses considered within the price that is
Fix the product or service.
To calculate the net total, one must calculate the total deduction of the
withholdings and contributions by law of each country.
Financial budget
It consists of setting the estimated investment for sales, various revenues for
develop a cash flow that measures the economic and real state of the
company. It includes:
income budget (the total gross without deducting expenses)
budget of expenses (to determine the liquid or net)
net flow (difference between income and expenses)
final box
initial box
minimum box
This includes the calculation of p, also known as expenditures of
capitals.
Treasury budget
It is formulated with the estimated forecast of available funds in cash, banks.
and easily achievable values. It is also called cash budget or
in cash because it consolidates the various transactions related to the
monetary fund inflows (cash sales, recoveries of
wallet, financial income, etc.) or with cash outflows
caused by the freezing of debts or amortizations of loans or
suppliers or payroll payments, taxes or dividends. It is formulated in two
short periods: months or quarters.
Budget of capitalizable expenditures
Control the different investments in fixed assets such as
acquisitions of land, construction or expansion of buildings and
purchase of machinery and equipment, is used to evaluate possible alternatives
of investment and to know the amount of funds required and their availability in
the [Link] which you can know what time will be required
information to know when to take the alternatives most
viable for the development of the plan.
Public budget
They are those who formulate governments, states, companies.
decentralized, etc., to control the finances of their different
dependencies. In these, the resources required for the operation are quantified.
normal, the investment and the servicing of the public debt of the organizations and the
official entities.
Public revenues and their classification
Public resources (income) are the various ways of grouping, organizing
and present public resources (revenues), with the aim of carrying out
economic and financial analysis and projections required in a
determined period. Its classification depends on the type of analysis or study
that one wishes to carry out; however, three are generally used.
classifications that are:
According to its periodicity
This groups income according to the frequency with which the treasury perceives them.
They are classified into ordinary and extraordinary, with the ordinary being those
which are collected periodically and permanently, coming from sources
traditional, consisting of taxes, fees, and other means
state financing newspapers. The extraordinary revenues from
exclusion, would be those who do not meet these requirements.
According to Article 14 of the Organic Law on Budgetary Regime
Venezuelan: "Non-recurrent fiscal revenues are extraordinary, such as
such as those arising from public credit operations, from laws that
sources of income of an occasional nature or whose validity does not exceed three
years and from the sale of assets owned by the State.
However, for the purposes of budget classification, they must
considered as extraordinary income the existence of the Treasury
not committed as of December thirty-first of the previous fiscal year
to the current one, used in accordance with article 17 of the same Law that applies
establishes: "When it is essential to comply with the provisions in the
Article 3 of this Law, the revenue budget may include
up to half of the uncommitted and estimated Treasury inventory
for the thirty-first of December of the year of submission of the Project
Budget. This source of funding will have the character of income.
extraordinary
Economic
According to this classification, public revenues are classified as current,
capital resources and financial sources. Current revenues are
those that come from tax revenues, non-tax revenues, and
transfers received to finance current expenses. The resources of
Capital is derived from the sale of usable goods, movable and
real estate, compensation for loss or damage to property, collections of
granted loans, decrease in inventories, etc.
Financial sources are generated by the decrease of financial assets.
(use of availabilities, sale of bonds and stocks, recovery of
loans, etc.) and the increase in liabilities (obtaining loans,
increase in accounts payable, etc.)
By Origin Sectors
This classification is based on one of the aspects that characterize the
economic structure of Venezuela, where a high proportion of
products are made in oil and iron activities, which implies
that most of the income arises from the operations carried out in the
Exterior. This classification presents the following:
External sector
the oil workers
Iron Revenues
Currency utility
External debt
Internal sector:
or Taxes
oRates
the territorial domain
Internal Indebtedness
or Other income
Regarding public expenditures (public spending) and their classification
These constitute the various ways of presenting public expenditures.
foreseen in the budget, with the purpose of analyzing them, providing
additional information for the general study of the economy and politics
economic plan that the National Government intends to implement for a period
determined. Below are the different ways to classify
the public expenditure (spending) anticipated in the budget:
Institutional classification
Through it, public spending of the institutions is ordered or
dependencies to which budget credits are assigned, in a
determined period for the fulfillment of its objectives.
Classification by nature of expense
It allows identifying the goods and services that are acquired with the
assignments provided for in the budget and the destination of the transfers,
through a systematic and homogeneous order of these and of the
transfers, through a systematic and homogeneous order of these and of
the variations of assets and liabilities that the public sector applies in the
development of its production process.
Economic classification
Order public expenses according to the basic structure of the system.
of national accounts to adjust the results of the transactions
public with the system, it also allows analyzing the effects of the activity
public about the national economy.
Description of the main categories of the economic classification:
Current expenses: these are the expenses for consumption or production, the rent of the
property and the transactions granted to the other components of the
economic system to finance expenses of that nature.
Capital expenditures: These are the expenses aimed at real investment and the
capital transfers that are made for that purpose to the
exponents of the economic system.
Sectoral classification
This presents public spending broken down by sectors.
economic and social, where it has its effect. It aims to facilitate the
coordination between development plans and the government budget.
Classification by programs
This presents public expenditure broken down by sectors
economic and social aspects, where it has its effect. It aims to facilitate the
coordination between development plans and the government budget.
Regional classification
It allows you to arrange the expenditure according to the regional destination given to it. It reflects the

meaning and scope of the actions carried out by the public sector, in the field
regional.
Performance-based budget
Include information on budgeting performance for realignment.
the federal budgeting process from its focus on inputs to one
that also includes the production obtained from the use of such inputs.
Mixed classification
They are combinations of public expenditures, which are developed for the purpose of
analysis and decision making. This classification allows us to show a series
of aspects of great interest, which enable the systematic study of spending
public and the determination of the Budget Policy for a period
Given. The following are the most commonly used mixed classifications:
Institutional by program
Institutional due to the nature of the expenditure
Economic institutional
Sectoral institutional
For the purpose of economic expenditure
Economic sector
• By program and by the nature of the expense
Private
They are the budgets used by private companies as
instrument of its administration
They contain the same economic and financial elements in terms
general budget principles of the public sector with some variations in the
conception of budget allocation items or accounts
Other classifications of budgets
• For its content
The Main: These budgets are a kind of summary, in which we
they present the core elements in all the budgets of the
company.
The auxiliaries: They are those that analytically show the operations.
estimated by each of the departments that make up the organization
of the company.
By the valuation technique
Dear: These are the budgets formulated on empirical bases;
their numerical figures, being determined based on previous experiences,
they represent only the more or less reasonable probability that
indeed, whatever has been planned will happen.
Standards: These are those formulated based on scientific grounds or
scientific studies significantly reduce the likelihood of
error, so their figures, unlike the previous ones, represent the
results that should be obtained.
Due to its reflection in the financial statements
Financial position: This type of budget shows the position
static that the company would have in the future, in case it were to be fulfilled
the predictions. It is presented through what is known as position
budgeted financial (balance sheet).
Regarding results: Which show the possible profits to be obtained in a
future period.
On costs: They are prepared based on the principles established in
the sales forecasts, and reflect, to a future period, the expenditures
that are to be made for the total cost or any of its
parts.
For the purposes it intends
About promotion: They are presented in the form of a financial project and
expansion; for its elaboration, it is necessary to estimate the revenues and expenses
that must be carried out in the budget period.
For application: They are usually prepared for credit requests.
They constitute general forecasts about the distribution of resources with
What account, or will the company have to account for.
On fusion: They are used to anticipate operations.
that result from a conjunction of entities.
• By areas and levels of responsibility: When it is desired to quantify the
responsibility of those in charge of the areas and levels in which it is divided
a company.
• By programs: This type of budget is usually prepared by
government dependencies, decentralized, boards, institutions,
etc. Their figures express the expenditure in relation to the objectives that are
they pursue, determining the cost of the concrete activities that each
the dependency must carry out to implement the programs under its responsibility.
•
Zero Base
It is one that is carried out without taking into account the experiences had.
This budget is useful in light of the excessive and continuous increase of the
prices, demands for updates, changes, and continuous increases of the
costs at all levels, basically. It turns out to be very expensive and with
late information. In the conception of some authors, the process
analysis of each budget item, starting with the current level
of each of them, to later justify the additional disbursements
that may be required by the programs in the next exercise, it is typical of a
public administration and should not be the procedure for deciding on the
private sphere. To this end, they promoted the PBC (zero-based budget) as
technique that supports the principle that for the next period the amount
from each match is zero. While one approach validates what has been executed with
anteriority, another claims that nothing exists and everything must be justified from
zero, analyzing the cost-benefit relationship of each activity. The first
from the systems (incremental method) modifies the items of the period
previous, while the second transfers to each period the
responsibility for its justification to the heads of each area. The emergence
the PBC constituted a reaction to the public sector procedure -
fundamentally quantitative and almost nothing qualitative - that not only does not
contributes to a critical analysis of each match, but rather by a kind of
Inertia generally promotes an increase in expenditures.
Its instrumentation or application includes several stages, with the most
relevant the analysis of the decision units or packages, since of
this largely depends on the results to improve its effectiveness.
The PBC is very unoperational because it requires each manager to start
every year from scratch, as if their activity had never existed and
discover a new way of working and also evaluate it by relating
its cost with the benefit. In a genuine budget, the items of
previous exercise is always subject to modifications or to its
removal, and must be carefully analyzed and evaluated in order to
its destinations. However, it should be noted that the common budget does not
it implies that the previous expenditures are simply ratified and to
increased drastically. On the contrary, it demands competence for the review
periodic review of all actions taken and the evaluation of management and of the
activities of each responsible for the definition of the items that it
component.
The PBC consists of a process through which the administration, when executing
the annual budget, makes the decision to allocate the resources intended for
indirect areas of the company, in such a way that in each of those
indirect activities show that the generated benefit is greater
that the cost incurred.
It doesn't matter that the activity has been taking place for a long time.
back, if it does not justify its benefit, it must be eliminated; that is to say, part of
principle that all activity must be subject to cost analysis -
benefit. This technique does not apply to any cost element such as
raw materials, labor or manufacturing overhead. It is from
immediate application, especially in those companies where the ratio
the indirect costs to the product are greater than the direct costs, with
regarding the total costs.