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Date: 2018-10-17
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Financial Budgets (Profit & Loss)

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Financial Budgets are the cornerstones of almost all rudimentary financial controlling in each company. Budgets are performed on all thinkable time horizons, and they can concern all thinkable aspects of business planning like: yearly budgets, quarterly budgets, business cases, projects management etc.

Very often, budgets are conceived to create targets on cost spending and revenue generation. Budgets are used to forecast and control an acceptable Profit & Loss (P&L) statement for the company, in which expected revenue is balanced to allowable cost levels. By keeping costs and maintaining revenue according to budget, companies will be able to control target achievement of expected and desirable profit levels. This controlling of the budgets will enable the companies to reach their Return on Sales (ROS) target, which might have already been communicated to outside stakeholders such as shareholders.

However, budgets are notoriously difficult to achieve, and many unforeseen effects on both revenue and costs occur throughout the budgeted period. Therefore, it is highly recommendable that companies monitor their budgets rigorously to actual cost and revenue, so that actions can be made to either cut costs or increase revenue. A rigorous control of actuals vs. budgets will also signal unexpected positive effects to the P&L that will yield a better result than budgetted.  

Date Created: 2013-09-10
Posted by: Admin
Financial Budgets (Profit & Loss)

Related resources:

Return on Investment (ROI)
Return on Assets (ROA)
Return on Equity (ROE)
Return on Capital Employed (ROCE)
Contribution Margin and Contribution Margin Ratio

Budgets, Profit and Loss, Profit & Loss, MBA, MSC, Business learning, Financials, Budgetting, Economic Control


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