Budget
What is it?
The ratio represents the planned and allocated amount of money set aside to cover various costs, investments and expenses during a specified period of time. It is a financial indicator that gives an overall picture of how much resources are available to run the business during the specified period and is used as a basis for financial planning and management.
Note that this KPI is not accumulated for the current year, but shows the budget for the time period selected (summed up if several budget periods are selected).
How is it calculated?
Budget summed up
* Only includes budget for specified time period.
Why is it important to follow?
Following the KPI is important for several reasons:
Financial planning: It provides a clear overview of the financial resources available to run the business during the specified time period. It is fundamental to developing a realistic and structured financial plan.
Cost control: By following the budget, the organization can keep track of its costs and avoid overruns. It helps maintain financial discipline.
Decision making: The budget serves as an important basis for making decisions about investments, projects and strategies. Having a clear understanding of the overall budget is critical in determining whether proposed actions are financially feasible.
Performance monitoring: The budget serves as a reference point for evaluating the organization's financial performance. It makes it possible to compare actual expenses and income with the planned figures and identify any deviations.
Resource prioritization: Knowing the total budget helps prioritize resource allocation. The organization can focus its resources on the areas that are most critical and strategically important.
In conclusion, it is important to follow the key figure because it is central to financial planning, cost control, decision making and performance monitoring. It provides a clear structure for managing financial resources and helps organizations achieve their financial goals.
Created by Homepal
9/15/2023
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