You don't need to be a financial expert to prepare an operating budget . Below, we'll give you an example so you can easily create one. Excel is sufficient for this. The steps to follow are as follows:
Prepare a sales budget.
Continue with the production budget.
Develop a budget for materials and supplies.
Define the labor budget.
Prepare an administration and sales budget.
In this case, we will use the case of a company that manufactures and sells children's beds through an e-commerce platform . This example that I will address encompasses the projection of an finland phone data entire year, but the ideal is that you break down these same concepts on a monthly basis. Let's now go point by point:
1. Prepare a sales budget
The first thing this company must do is establish the total sales budget, which is obtained by multiplying the number of beds by the value of each one. The company in our example estimates selling 120 beds at a price of $15,000. The sales budget is the basic tool for this exercise, so you must learn how to do it properly.
operating budget example with annual sales calculation
2. Continue with the production budget
The next step is to define the production budget . This part defines the units that the company plans to sell and considers both the initial inventory —that is, the number of beds that the company has in stock— and the final inventory —the beds that it expects to end up with in its warehouse—.
In this case, if the company wants to sell 120 beds, it must add the 15 it already has and subtract the stock it expects to have at the end of the year. In this exercise, it is in the interest of our bed manufacturer to have in reserve the inventory equivalent to one month of sales, that is, 12 beds, but this varies according to the needs of any business. The result will indicate the number of beds to be manufactured.
Production budget = Units to be sold + Initial inventory – Final inventory
operating budget example with production calculation3. Develop a budget for materials and supplies
When it comes to a company with a production operation, the exercise is slightly more complex. You need to make a raw material budget. In our example, the bed manufacturer uses four basic materials to produce each unit: wood, hardware, light bulbs and paint .
Once you know how many units you need to produce, you need to determine the quantities of each raw material. In this case, for each bed you make, the company needs 20 kg of wood, 1 kit of hardware, 1 kit of spotlights and 1 litre of paint.
If each bed requires 20 kg of wood and you need to manufacture 123 units, then you have to multiply 123 x 20 to get the total amount of wood that our manufacturer will use that year. In this case, the result is 2,460 kg.