Operating budget

The operating budget of a company is a projection of the income and expenses for a certain period of time. This period of time may vary, but it usually is a year.

The operating budget is a very detailed piece of documentation. It is usually comprised of other smaller budgets, or sub-budgets—for example, the sales budget.

The operating budget can serve as a guide for a future period in time. For example, since the expenses are all outlined, the company has an idea of what it should spend its resources on. More so, the operating budget is used by analysts at the end of a period. One thing that analysts do is look at the deviations from the operating budget. They then use this information to figure out what caused the deviations and what the company can do to improve its performance.

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