BSBESB403 : Topic 6 Budgetting . pdf

1. The real flex is being private, staying lowkey and telling no one about your life.
2. The less you share, the less likely people will be in your business.
3. You won't have to seek validation to do what feels right for you.
4. You'll attract peace into your life. You'll experience less drama and toxic energy.
5. ⁠It'll be 10x more easier to walk some paths alone inorder achieve your personal goals.
6. When you build in silence, people won't know what to attack.
7. People don't care so much about you. They only care on what you can offer.
8. You'll owe no one any explanation about your personal life.
9. ⁠Not every one is your friend, live a private life to never attract bad energy.

Bro, remember this, money moves best in silence. Real men don't brag, they build.
Keep your growth private. Let your lifestyle do the talking. Let your peace be the flex.

1. BSBESB403 Plan Finances for New Business
Ventures
Session 6 –Budgeting
This Photo by Unknown Author is licensed under CC BY-SA

2. OFFICIAL
Working Capital Cycle
The process involved in transforming
firm input into revenue.
Also known as Operating Cycle
Typically, Manufacturers have the
longest operating cycle whereas
Service entities have the shortest
https://www.omega-performance.com/the-importance-of-the-operating-cycle-in-understanding-a-
businesss-story/operating-cycle/

3. OFFICIAL
Role of Budgets
The role of budgets
depends on the type of
organization. They
normally include:
Tool for Planning
Tool for Control
Tool for Organising
Tool for Motivation
Input Data
Projected
Future Cost
Take corrective
action
Plan of
Action
Actual
Future Cost
Variances
Historical Cost
Future Cost
Estimate
Formulate
Compute
Evaluate
Monitor
Planning
Control

4. OFFICIAL
Types of Budgets
Common budgets for small businesses
Static Budget (Fixed Budget) – a budget that does not change regardless of the
fluctuations and changes in the business operations.
Master Budget – shows the whole picture of the company. This is the portfolio of all
the company’s budgets.
Financial Budget – company’s strategy for asset, income, cash flow and expense
management. Includes operating and cash flow budgets.
Operating Budget – contains business income and expenses over a specific range of time
Cash Flow Budget – analysis and forecasting of inflow and outflow of cash
Budgets aid businesses in
Tracking resources
Envisioning various scenarios
Maximising efficiency

5. OFFICIAL
Factors that affect Forecasts
Secular Trend Movement – underlying direction of data (i.e. increasing, decreasing
or remaining constant). Normally influenced by:
Population Changes
Productivity Improvement
Technological Changes
Market Changes
Cyclical Movement – a pattern that is repeated over periods of different time
lengths (i.e. recession, recovery, prosperity, etc)
Seasonal Movement – fluctuations that repeat themselves each year (i.e. goods
with high demands on Valentines Day, Mother’s Day, Christmas Day etc.)
Irregular Movements – uncontrollable, random variations that impact greatly on the
level of business activity (weather patterns, calamities, market and currency value
fluctuations, changes in the political climate and industry changes

6. OFFICIAL
Forecasting vs Budgeting
Forecasting
Estimates the company’s future
financial outcomes by examining
historical data
Used to determine how companies
should allocate their budgets
Does not analyse variances
Regularly updated and can be used
by management to make immediate
actions
Budgeting
An outline of expectations
Estimates revenues and expenses
Includes
Expected cashflows
Expected debt-reduction
A budget is compared to actual results
to calculate variances
https://www.investopedia.com/ask/answers/042215/whats-difference-between-budgeting-and-financial-forecasting.asp#:~:text=%20Budgeting%20vs.%20Financial%20Forecasting%3A%20What%27s%20the%20Difference%3F,wants%20to%20take%20the%20company.%20A...%20More%20

7. OFFICIAL
Common Types of Budgets
Revenue Budgets
Sales Budgets
Sales Budgets by Product
Sales Budget by Period
Sales Budgets by Area
Fee/Income Budget
Operating Budgets
Purchases Budget for Retail Business
Cost of Sales
Cost of Goods Sold
Expenses Budget
Financial Performance Budget
Cash Budgets
GST and Cash Budgets
Discount Allowed and Bad Debts
Items Subject to GST
Accounts Receivable Collections Budget
Cash Receipts Budget
Cash Payments Budgets

8. OFFICIAL
Sales and Purchases Budget
Wattle Ltd. produces a single product. Based on the Cost and Revenue details given, you
will need to prepare the following:
A projected profit statement at a sales level of 24,000 units.
A purchases budget where the closing stock is set at 50% of monthly sales
Selling Price $75 per unit 100%
Variable Cost $45 per unit 60%
Contribution Margin $30 per unit 40%
Total Fixed Cost $720,000 per annum

9. OFFICIAL
Sales and Purchases Budget
A projected profit statement at a sales level of 24,000 units.
Projected Profit Statement for
January
Cost per Unit Quantity January
Sales Revenue $ 75.00 24,000 $ 1,800,000.00
Less: Variable Cost $ 45.00 24,000 1,080,000.00
Contribution Margin $ 30.00 24,000 720,000.00
Less: Fixed Costs 720,000.00
Net Profit -
No Income, no loss.

10. OFFICIAL
Sales and Purchases Budget
Purchases Budget with Closing Stock is 50% of monthly sales. (Please note that Opening Stock was carried over from the
previous month.
Projected Profit Statement for January
Cost per UnitQuantity January
Sales Revenue $ 75.00 24,000 $ 1,800,000.00
Less: Variable Cost $ 45.00 24,000 1,080,000.00
Contribution Margin $ 30.00 24,000 720,000.00
Less: Fixed Costs 720,000.00
Net Profit -
No Income, no loss.
Purchase Budget for January
Budget Sales ($)
Budget Cost of Sales ($)
Add: Closing Stock ($)
Available ($)
Less: Opening Stock ($) 45,000.00
Required Purchases ($)
Required Purchases (units)

11. OFFICIAL
Sales and Purchases Budget
Purchases Budget with Closing Stock is 50% of monthly sales. (Please note that Opening Stock was carried over from the
previous month.
Projected Profit Statement for January
Cost per UnitQuantity January
Sales Revenue $ 75.00 24,000 $ 1,800,000.00
Less: Variable Cost $ 45.00 24,000 1,080,000.00
Contribution Margin $ 30.00 24,000 720,000.00
Less: Fixed Costs 720,000.00
Net Profit -
No Income, no loss.
Purchase Budget for January
Budget Sales ($) 1,800,000.00
Budget Cost of Sales ($) 1,080,000.00
Add: Closing Stock ($) 900,000.00
Available ($) 1,980,000.00
Less: Opening Stock ($) 45,000.00
Required Purchases ($) 1,935,000.00
Required Purchases (units) 43,000

12. OFFICIAL
Budgeted Income Statement and
Cashflows
The following is a budget prepared by Red
Back Ltd (Cash Basis) for the 3 months ending
31 March.
Changes in April are:
Fees received are expected to fall by 10%
Wages will rise by 1%
All other expenses will rise by 5%
Complete a budgeted Income Statement
and Cash Flows for April. Assume that the
owners draws $40,000 from the bank account
monthly.
Budgeted Income Statement
January February March Total
Receipts:
Fees Received $ 80,000.00 $ 90,000.00 $100,000.00 $270,000.00
Payments:
Wages 10,000.00 11,000.00 12,000.00 33,000.00
Office Expenses 4,000.00 4,200.00 4,800.00 13,000.00
Equipment Expenses 2,200.00 2,400.00 2,600.00 7,200.00
Motor Vehicle Expenses 5,800.00 5,200.00 5,000.00 16,000.00
Advertising 8,000.00 9,000.00 10,000.00 27,000.00
Other 3,400.00 3,600.00 3,000.00 10,000.00
Total Payments 33,400.00 35,400.00 37,400.00 106,200.00
Profit 46,600.00 54,600.00 62,600.00 163,800.00
Budgeted Cash Flows
Opening Cash Balance -$ 25,010.00 -$ 18,410.00 -$ 3,810.00 -$ 25,010.00
Add: Receipts 80,000.00 90,000.00 100,000.00 270,000.00
Equals Cash Available 54,990.00 71,590.00 96,190.00 244,990.00
Less: Payments 33,400.00 35,400.00 37,400.00 106,200.00
Less: Owner's Withdrawal 40,000.00 40,000.00 40,000.00 120,000.00
Closing Cash Balance - 18,410.00 - 3,810.00 18,790.00 18,790.00

13. OFFICIAL
Budgeted Income Statement and
Cashflows
Budgeted Income Statement
January February March Total
Receipts:
Fees Received $ 80,000.00 $ 90,000.00 $100,000.00 $270,000.00
Payments:
Wages 10,000.00 11,000.00 12,000.00 33,000.00
Office Expenses 4,000.00 4,200.00 4,800.00 13,000.00
Equipment Expenses 2,200.00 2,400.00 2,600.00 7,200.00
Motor Vehicle Expenses 5,800.00 5,200.00 5,000.00 16,000.00
Advertising 8,000.00 9,000.00 10,000.00 27,000.00
Other 3,400.00 3,600.00 3,000.00 10,000.00
Total Payments 33,400.00 35,400.00 37,400.00 106,200.00
Profit 46,600.00 54,600.00 62,600.00 163,800.00
Budgeted Cash Flows
Opening Cash Balance -$ 25,010.00 -$ 18,410.00 -$ 3,810.00 -$ 25,010.00
Add: Receipts 80,000.00 90,000.00 100,000.00 270,000.00
Equals Cash Available 54,990.00 71,590.00 96,190.00 244,990.00
Less: Payments 33,400.00 35,400.00 37,400.00 106,200.00
Less: Owner's Withdrawal 40,000.00 40,000.00 40,000.00 120,000.00
Closing Cash Balance - 18,410.00 - 3,810.00 18,790.00 18,790.00
Budgeted Income Statement
March Expected ChangeApril (Budgeted)
Receipts:
Fees Received $100,000.00
Payments:
Wages 12,000.00
Office Expenses 4,800.00
Equipment Expenses 2,600.00
Motor Vehicle Expenses 5,000.00
Advertising 10,000.00
Other 3,000.00
Total Payments 37,400.00
Profit 62,600.00
Budgeted Cash Flows
Opening Cash Balance -$ 3,810.00
Add: Receipts 100,000.00
Equals Cash Available 96,190.00
Less: Payments 37,400.00
Less: Owner's Withdrawal 40,000.00
Closing Cash Balance 18,790.00

14. OFFICIAL
Budgeted Income Statement and
Cashflows
Budgeted Income Statement
January February March Total
Receipts:
Fees Received $ 80,000.00 $ 90,000.00 $100,000.00 $270,000.00
Payments:
Wages 10,000.00 11,000.00 12,000.00 33,000.00
Office Expenses 4,000.00 4,200.00 4,800.00 13,000.00
Equipment Expenses 2,200.00 2,400.00 2,600.00 7,200.00
Motor Vehicle Expenses 5,800.00 5,200.00 5,000.00 16,000.00
Advertising 8,000.00 9,000.00 10,000.00 27,000.00
Other 3,400.00 3,600.00 3,000.00 10,000.00
Total Payments 33,400.00 35,400.00 37,400.00 106,200.00
Profit 46,600.00 54,600.00 62,600.00 163,800.00
Budgeted Cash Flows
Opening Cash Balance -$ 25,010.00 -$ 18,410.00 -$ 3,810.00 -$ 25,010.00
Add: Receipts 80,000.00 90,000.00 100,000.00 270,000.00
Equals Cash Available 54,990.00 71,590.00 96,190.00 244,990.00
Less: Payments 33,400.00 35,400.00 37,400.00 106,200.00
Less: Owner's Withdrawal 40,000.00 40,000.00 40,000.00 120,000.00
Closing Cash Balance - 18,410.00 - 3,810.00 18,790.00 18,790.00
Budgeted Income Statement
March Expected Change April (Budgeted)
Receipts:
Fees Received $100,000.00 -$ 10,000.00
Payments:
Wages 12,000.00 120.00
Office Expenses 4,800.00 240.00
Equipment Expenses 2,600.00 130.00
Motor Vehicle Expenses 5,000.00 250.00
Advertising 10,000.00 500.00
Other 3,000.00 150.00
Total Payments 37,400.00 1,390.00
Profit 62,600.00
Budgeted Cash Flows
Opening Cash Balance -$ 3,810.00
Add: Receipts 100,000.00
Equals Cash Available 96,190.00
Less: Payments 37,400.00
Less: Owner's Withdrawal 40,000.00
Closing Cash Balance 18,790.00

15. OFFICIAL
Budgeted Income Statement and
Cashflows
Budgeted Income Statement
January February March Total
Receipts:
Fees Received $ 80,000.00 $ 90,000.00 $100,000.00 $270,000.00
Payments:
Wages 10,000.00 11,000.00 12,000.00 33,000.00
Office Expenses 4,000.00 4,200.00 4,800.00 13,000.00
Equipment Expenses 2,200.00 2,400.00 2,600.00 7,200.00
Motor Vehicle Expenses 5,800.00 5,200.00 5,000.00 16,000.00
Advertising 8,000.00 9,000.00 10,000.00 27,000.00
Other 3,400.00 3,600.00 3,000.00 10,000.00
Total Payments 33,400.00 35,400.00 37,400.00 106,200.00
Profit 46,600.00 54,600.00 62,600.00 163,800.00
Budgeted Cash Flows
Opening Cash Balance -$ 25,010.00 -$ 18,410.00 -$ 3,810.00 -$ 25,010.00
Add: Receipts 80,000.00 90,000.00 100,000.00 270,000.00
Equals Cash Available 54,990.00 71,590.00 96,190.00 244,990.00
Less: Payments 33,400.00 35,400.00 37,400.00 106,200.00
Less: Owner's Withdrawal 40,000.00 40,000.00 40,000.00 120,000.00
Closing Cash Balance - 18,410.00 - 3,810.00 18,790.00 18,790.00
Budgeted Income Statement
March Expected Change April (Budgeted)
Receipts:
Fees Received $100,000.00 -$ 10,000.00 $ 90,000.00
Payments:
Wages 12,000.00 120.00 12,120.00
Office Expenses 4,800.00 240.00 5,040.00
Equipment Expenses 2,600.00 130.00 2,730.00
Motor Vehicle Expenses 5,000.00 250.00 5,250.00
Advertising 10,000.00 500.00 10,500.00
Other 3,000.00 150.00 3,150.00
Total Payments 37,400.00 1,390.00 38,790.00
Profit 62,600.00 $ 51,210.00
Budgeted Cash Flows
Opening Cash Balance -$ 3,810.00
Add: Receipts 100,000.00
Equals Cash Available 96,190.00
Less: Payments 37,400.00
Less: Owner's Withdrawal 40,000.00
Closing Cash Balance 18,790.00

16. OFFICIAL
Budgeted Income Statement and
Cashflows
Budgeted Income Statement
January February March Total
Receipts:
Fees Received $ 80,000.00 $ 90,000.00 $100,000.00 $270,000.00
Payments:
Wages 10,000.00 11,000.00 12,000.00 33,000.00
Office Expenses 4,000.00 4,200.00 4,800.00 13,000.00
Equipment Expenses 2,200.00 2,400.00 2,600.00 7,200.00
Motor Vehicle Expenses 5,800.00 5,200.00 5,000.00 16,000.00
Advertising 8,000.00 9,000.00 10,000.00 27,000.00
Other 3,400.00 3,600.00 3,000.00 10,000.00
Total Payments 33,400.00 35,400.00 37,400.00 106,200.00
Profit 46,600.00 54,600.00 62,600.00 163,800.00
Budgeted Cash Flows
Opening Cash Balance -$ 25,010.00 -$ 18,410.00 -$ 3,810.00 -$ 25,010.00
Add: Receipts 80,000.00 90,000.00 100,000.00 270,000.00
Equals Cash Available 54,990.00 71,590.00 96,190.00 244,990.00
Less: Payments 33,400.00 35,400.00 37,400.00 106,200.00
Less: Owner's Withdrawal 40,000.00 40,000.00 40,000.00 120,000.00
Closing Cash Balance - 18,410.00 - 3,810.00 18,790.00 18,790.00
Budgeted Income Statement
March Expected ChangeApril (Budgeted)
Receipts:
Fees Received $100,000.00 -$ 10,000.00 $ 90,000.00
Payments:
Wages 12,000.00 120.00 12,120.00
Office Expenses 4,800.00 240.00 5,040.00
Equipment Expenses 2,600.00 130.00 2,730.00
Motor Vehicle Expenses 5,000.00 250.00 5,250.00
Advertising 10,000.00 500.00 10,500.00
Other 3,000.00 150.00 3,150.00
Total Payments 37,400.00 1,390.00 38,790.00
Profit 62,600.00 $ 51,210.00
Budgeted Cash Flows
Opening Cash Balance -$ 3,810.00 $ 18,790.00
Add: Receipts 100,000.00 90,000.00
Equals Cash Available 96,190.00 108,790.00
Less: Payments 37,400.00 38,790.00
Less: Owner's Withdrawal 40,000.00 40,000.00
Closing Cash Balance 18,790.00 30,000.00

17. OFFICIAL
Create your own budget
In relation to your own business or business idea:

Formulate a projected/budgeted Income
Statement (Cash Basis) and Cash Flows for the 1
st

3 months (1
st
Quarter) of operations.