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:

1. …………………………………  e.g. Profit and Loss Account, Balance Sheet
2. ………………………………….. to produce, to bring
3. ………………………………… the amount or number of something
4. ………………………………… the amount of money moving into and out of a business
5. ………………………………… the amount of money moving into a business
6. ……………………………….. 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

Are you an accountant? Do you need to speak English at work? Are you preparing budgets or financial reports? 

Contact me to schedule your free trial lesson.
​