Budget

Super Brands

Budget

This is one of my interesting topics and to make it more interesting i made this very precise. Budget is not only to save money, It is a process of creating a plan to spend money, balance the expense in co-ordination with the cash inflow / income

Generally, all Budget plans will be planned annually and to be reviewed Bimonthly or quarterly

Qualities of Budget

1.Objective

2. Strategic approach

3. Measures / review

4.Targets – quantifiable

Budgeting can be done on 3 ways.

1. Incremental – Performing

2. Deficit – Non - Performing

3. Balanced – Less investment

Things which are accountable in budgeting:

I will try to put across the budgeting for a Product and a company

I. PRODUCT 

For a Product both Production and Marketing budget to be worked upon to understand the expense and contribution of the product to the company

1. Production Budget

·       Based on the sales forecast the Production budget will be worked

·       Raw material cost (Raw material + packing, transport)

·       Production (Material purchase & Consumption +Labor + Administration + Distribution + Operations)

·       All to be summarized and the production cost will be calculated

 2. Marketing Budget

·       This includes Product advertisement (campaigns & all sort of promotions)

·       Sales force investments

·       Free offers / samples / Testing

·       Distribution

·       The marketing budget should be 8-10 % and for the new product based on the potential it can be increased to 12-15%

II. COMPANY

The number of heads of the company budget will be less as compared to product

Here the Budget will be calculated on 2 points

1. Fixed Expense

2. Variable Expense (marketing)

Fixed Expense:

The following points are considered on fixed expense

a.) Gross contribution to sales

b.) Salary & Incentives of all employees

c.) Travel Expense

d.) Administration

Variable Expense:

All Marketing budget is coming under variable expense

A part from this the distribution expense is also coming in variable expense and probably the distribution cost should be around 4-5%.

 How much % we can spend on fixed & variable ?

1. Fixed heads – 30 %

2. Variable heads – 50%

In Total we can spend over 80% of budget and 20 % should be Gross contribution for a healthy & profitable organization

Thanks for spending your time!

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SM