Budget and budget scenario
Do you want to record the organisation's budgets in the financial accounting so you can create budgets that are integrated with the financial data? Do you want to avoid separate spreadsheets for budgets? Do you want to have insight into the budget and be able to compare by realisation, index or a different time frame? Want to set alerts for exceeding the budget or costs turning out higher than planned?
When setting up a budget, you have a numerical representation of what you want to achieve in the next year - your strategy and the activities you need to undertake to achieve it. Budgeting helps you to review, check and execute your plans. You can consider a budget scenario as the delimited collection of budgets on one or more ledger accounts within a specific financial year. Budget scenarios are recorded at administration level.
You use the budget to periodically check whether the reality is still 'according to plan', i.e. whether the goals set are being achieved. At the end of the year, the review takes place in which the realised results are compared with the budget.
Thus, the budget fulfils a number of functions:
- it establishes the goals set and the costs to be made for the coming year,
- it coordinates the activities and resources for the realisation of these goals in the coming year,
- it serves as the basis for matters such as authorisations and responsibilities,
- it is the basis for the (variable) remuneration.
Bottom-up or Top-down budgeting
In Profit, you can record budgets in two ways:
- Manual budgeting (bottom-up)
When the budget is set up, use is made of the knowledge of employees and line management.
With the bottom-up approach you can allocate in a more detailed way by making use of allocation codes (for example, an individual amount for each department) separately per allocation axis.
- Automatic generation (top-down)
When the budget is set up, the Board sets the goals which are then translated into sub budgets.
Budgeting always takes place within one (broken) financial year. So it is not possible to record one budget covering multiple financial years. However, you can of course create new individual budgets for consecutive years.
You can budget at allocation level. If you allocate a ledger account, you can also budget on the ledger account/cost centre combination (per allocation axis).
You can manually enter a budget, but you can also import the budget.