The term budget means budget, that is, the financial planning and estimation of a company’s income, expenses and investments.
The budget (that is, the act of making a budget) is important because it describes the company’s objectives, allowing adjustment measures to be taken to achieve the stated objectives.
Imported from English, the term budget became popular with the installation of multinational companies. Although the translation of the budget is simply “budget”, in the corporate world, the meaning of the budget corresponds more specifically to the static type budget .
The corporate static budget is one in which forecast data cannot be changed when it is already running, even if unforeseen events occur. For example, if a company sets a production or sales volume in its budget, it will not be able to adjust the objectives during the year, even if there are some changes in the market.
Despite the lack of flexibility, the budget is quite popular with large organizations, especially multinationals. This is because the method facilitates the consolidation of the budgets of all the units of the company, which are often distributed in several countries, in a single general budget.
Although the forecast is strict, companies use mechanisms to bring the budget closer to reality. Every month, the budget is reviewed to compare the predicted values with the realized values. Based on this analysis, the forecast is made , that is, the budget revision for the following months, taking into account the values actually carried out. The budget and the prognosis is one of the most popular methods of enterprise budget.