Preparation of budgets Sales/Cash Receipts, Inventory Purchases/Cash Payments, Selling & Administrative/Cash Payments, and Cash Budget

Participative Budgeting Involve all who must live by the budget in the budgeting process Use team work to get the best results Management must make sure employee goals fit with company goals Management is involved to make sure the budget is efficient, challenging but achievable

Sales/Cash Receipts Budget Quarterly Projected sales revenues– involve sales people in forecast, economic forecasts, competitor trends, etc. Static budget – shows one level of activity Projects total revenues earned Projects patterns of cash flow from cash sales and collections on account

Inventory Purchases Budget/Cash Payments Quarterly Tied into the sales budget Allows planning to meet sales demand and on-hand inventory Projects pattern of cash payments for inventory Static budget

Selling and Administrative Expense Budget/Cash Payments Quarterly Maps out expenses and cash paid for expenses List fixed costs, such as office salaries , estimated average utility costs, depreciation List variable costs, such as selling supplies and sales commissions (often a % of total sales projected) Projects cash payment patterns Static budget

Cash Budgets Quarterly Projects cash needs from month to month Data comes from Sales/cash receipts budget, inventory purchases/cash payments budget, Selling and administrative/cash payments budget Planning helps company project cash shortages and implement a line of credit or establish other borrowings Static budget