Description
An annual budget process involves forecasting a company's income and expenditures for the next year and officially recording these details using budgeting software. Companies use the budget to track income and expenses in a detailed way for better operational decisions.
Example
The annual budget process primarily includes reviewing financial accounts from the previous 1-2 years, chalking out a rough estimate of annual income and expenses, scrutinizing the expenses more closely, and posting the budget on the financial system.
Why it matters
An annual budget enables a company to effectively monitor its financial status and allows more productive long-term planning. With an annual budget, businesses can know when they can establish new revenue targets, invest in new profit streams, or recruit new personnel. The annual budget also aids in better handling of emergencies apart from better management and control of finances.