Once prepared the operating budget and all of its programs, we collect this information to prepare the financial budget, which outlines the accounting and projected financial position of the company. The financial budget is of particular interest to the management and shareholders, as it shows the projected result of the company as a whole. Even, it is particularly useful for external entities.
This budget in turn is composed of three main states:
Income statement (profit and loss)
- Cash Flow Statement
- Balance Sheet Projection
Responsible for preparing these budgets is the function Accounting or Finance. Remember also that the importance of these budgets are not only in forecasting results (before), but allow a further control of the actual results to be compared and measured their variations, looking for the cause of this difference (POST). You can also apply a financial analysis (ratios).
Budgeted income statement is the integration of the various programs operating budget. As such, reflects the net book value that the company expects to achieve within a year (or periods).
This projection provides a basis to identify and propose improvements in costs and expenses.
Planning and control cash flow
The cash flow budget (also known as projected cash flow or cash budget) is a program of physical receipts and expenditures of money expected according to operational planning and investment plan. It is the fundamental tool of the treasury function, and for planning purposes, it is conducted monthly, quarterly or annually (financial liability).
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