What is Operating Budget ?

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 An Operating Budget is a detailed financial plan that outlines an organization's projected revenues and expenses over a specific period—typically a fiscal year. It serves as a roadmap for day-to-day operations and helps ensure that resources are allocated efficiently to meet strategic and operational goals.

Key Components of an Operating Budget:

 

  1. Revenue Projections
    • Sales income
    • Service fees
    • Grants or subsidies
    • Other income sources
  2. Operating Expenses
    • Salaries and wages
    • Utilities
    • Rent or lease payments
    • Supplies and materials
    • Maintenance and repairs
    • Administrative costs
  3. Net Operating Income
    • Calculated as:
      Total Revenue−Total Operating ExpensesTotal Revenue−Total Operating Expenses
    • Indicates whether the organization expects a surplus or deficit

Purpose and Benefits:

  • Planning: Helps departments align their activities with financial constraints.
  • Control: Enables monitoring of actual performance against budgeted figures.
  • Decision-making: Supports informed choices about resource allocation.
  • Accountability: Encourages responsible financial management across teams.

 

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