Financial Planning, Budgeting, and Forecasting: Financial Intelligence Collection (7 Books)

Preparing an Operating Budget

NOW LET ’S TURN to how you might prepare an operating budget for your department or unit. To prepare such a budget, you need to take eight steps:

• Defining your goals
• Articulating your assumptions
• Forecasting sales
• Forecasting revenues
• Forecasting cost of goods sold
• Estimating SG&A costs
• Calculating operating income
• Exploring “what-if ” scenarios

Below, we look at each of these steps more closely.

Defining your goals

Some goals may be set by senior management, while others are determined by the managers of individual departments or units. These goals will reflect both the organization’s larger strategic priorities ...