Operating Budget | Meaning and Definition

What is the Operating Budget?

An operating budget is a comprehensive estimate of a company’s income and spending over a certain time period. Companies often develop an operational budget near the end of the year to forecast activities for the next year.

The more specific and useful an operational budget is, the more useful it is. A high-level summary of an operational budget may be included, as well as multiple supporting sub-budgets that give more information. Important elements of the operational budget are –

  •     Revenue – This refers to the various methods by which a corporation earns money through selling goods or services. Revenue may be forecasted using a basic year-over-year comparison, but breaking revenue down into its constituent parts, such as unit volume and average price, can provide more information.
  •     Fixed Costs – Fixed costs are expenses that are relatively consistent and must be paid regardless of whether sales are increasing or decreasing. Rent, utilities, equipment leasing, and insurance are just a few examples.
  •     Non-Operating Expenses – These are expenses that are unrelated to a company’s primary operation. Interest payments, asset disposal losses, and currency exchange charges are among the most typical non-operating expenditures.