Autumn is the time of year when businesses start preparing their budgets for the forthcoming year. The task is quite difficult and more complex than just predicting how much the company is going to earn. The CFO must consider more factors such as production, predicted expenditure, cash flows, as well as overall situation on the market.
Learn a few terms for budgeting in English.
Master Budget
it is a strategy that documents expected
- future sales (expected revenue from sales of products or services),
- productions levels (how much is to be produced to meet the future sales),
- purchases (things to be bought to produce, e.g. raw materials),
- future expenses incurred (how much money will be spend to generate sales),
- capital investments (how much money will be spend to for example upgrade machinery),
- other
How to prepare a master budget?
Start with your sales.
- come up with a realistic estimate of next year’s sales.
- what quantity of goods must your factory produce?
- figure out the direct materials, direct labor, and overhead needed to make all these goods.
- estimate your cash flows. Next year’s cash flows. Start with cash payments: how much will you need to pay in order to make all the goods that you plan to produce next year? Then look at inflows: Where will you generate the cash inflows needed to support production? Will you need to borrow money next year?
- prepare the rest of next year’s financial statements.
EX. 1
Match the words in bold with their definitions below:
- ………………………………… e.g. Profit and Loss Account, Balance Sheet
- ………………………………….. to produce, to bring
- ………………………………… the amount or number of something
- ………………………………… the amount of money moving into and out of a business
- ………………………………… the amount of money moving into a business
- ……………………………….. to guess or calculate the cost, size, value etc.
check your answers below.
Glossary:
master budget – budżet łączny
expected sales – przewidywana sprzedaż
purchases – zakupy
expenses incurred – poniesione wydatki/nakłady pieniężne
to estimate – oszacować
direct labor – koszty bezpośrednie robocizny
overheads – koszty ogólne, pośrednie
cash flows – przepływy pieniężne
financial statements – sprawozdania finansowe np.: bilans, RZiS
Klucz:
1. financial statements, 2. generate, 3. quantity, 4. cash flows, 5. inflows, 6. estimate
What is a Budget? and How to Budget in 7 steps? – find out more
Here are 20 financial phrases typically used in budgeting, along with their definitions and Polish translations:
- Income
- Definition: Money received, especially on a regular basis, for work or through investments. Dochód
- Expense
- Definition: The cost required for something; the money spent on something. Wydatki
- Net Income
- Definition: The amount of income left after all deductions, such as taxes and other expenses. Dochód netto
- Gross Income
- Definition: Total income before any deductions or taxes are applied. Dochód brutto
- Fixed Costs
- Definition: Costs that do not change regardless of the level of goods or services produced. Koszty stałe
- Variable Costs
- Definition: Costs that vary depending on the level of production or services provided. Koszty zmienne
- Savings
- Definition: Money that is not spent and is set aside for future use. Oszczędności
- Debt
- Definition: Money that is owed or due. Dług
- Cash Flow
- Definition: The total amount of money being transferred into and out of a business, especially as affecting liquidity. Przepływ gotówki
- Emergency Fund
- Definition: A reserve of money set aside to cover unexpected expenses or financial emergencies. Fundusz awaryjny
- Budget Surplus
- Definition: When income exceeds expenses, resulting in extra funds. Nadwyżka budżetowa
- Budget Deficit
- Definition: When expenses exceed income, leading to a shortfall. Deficyt budżetowy
- Discretionary Spending
- Definition: Non-essential spending, often on wants rather than needs. Wydatki uznaniowe
- Mandatory Spending
- Definition: Spending on essential items, such as rent or utilities, that must be paid regularly. Wydatki obowiązkowe
- Interest Rate
- Definition: The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage. Stopa procentowa
- Loan
- Definition: A sum of money that is borrowed and expected to be paid back with interest. Pożyczka
- Credit Score
- Definition: A numerical expression based on a level analysis of a person’s credit files, representing their creditworthiness. Wynik kredytowy
- Debt-to-Income Ratio
- Definition: A financial metric used to assess a person’s ability to manage monthly debt payments. Wskaźnik zadłużenia do dochodu
- Amortization
- Definition: The process of gradually paying off a debt over a period of time through regular payments. Amortyzacja środków niematerialnych
- Financial Goals
- Definition: Specific objectives or milestones a person aims to achieve with their money. Cele finansowe