ED PPT
Page 1: Introduction to Budget
Definition of Budget
A budget is a quantitative plan for acquiring and using resources over a specified period.
It serves as a quantified expression of management's intentions, enabling the attainment of organizational goals.
Elements of a Budget
Comprehensive and coordinated plan
Expressed in financial and physical terms
Plan for the company's operations and resources
Future-oriented plan for a specific period
Page 2: Understanding Budgeting and Forecasting
Budgeting
The process of planning a company's revenue and expenses for a specific period.
Involves identifying cash flows and allocating necessary resources for spending.
Building an annual budget typically takes three to six months to complete.
Forecasting
Analyzing past trends to predict future business results based on current actuals.
Focuses on major expense and revenue items, typically conducted after financial statements are released.
Page 3: Budgeting Overview
Definition
A budget is a written estimation of financial performance for a department, project, business unit, or organization.
Budgeting Activity
The preparation of budgets is known as budgeting.
Budgeting Methodologies
Zero-Based Budgeting (ZBB)
Current year's budget is created from scratch, without considering the previous year’s budget.
Traditional Budgeting
Uses last year's budget as a base, making adjustments based on inflation, consumer demand, and market conditions.
Incremental Budgeting
Current year’s budget is prepared by modifying the previous year’s budget according to inflation.
Activity-Based Budgeting
Prepares the budget after analyzing cost drivers, focusing on specific activities incurring costs.
Page 4: Examples of Budgeting Methods
Activity-Based Budgeting
Example: Company Y expects 10,000 orders at $5 each to process sales orders, totaling $50,000.
Incremental Budgeting
Example: Previous year’s salary was $400,000; with a 10% increase and six new hires at $25,000 each, incrementally adjusting the budget.
Page 5: Characteristics of Traditional Budgeting
Inaccuracies
Based on guesswork and assumptions.
Updating Frequency
Updated infrequently, usually annually.
Focus
Concentrates on cost reduction rather than value creation.
Resource Usage
Often time-consuming and costly to create.
Page 6: Types of Common Budgets
Operating Budget
Highlights day-to-day expenses and revenues, including salaries and utilities.
Capital Budget
Assesses financial feasibility for long-term investments.
Cash Budget
Tracks incoming and outgoing cash flows to predict surpluses.
Master Budget
Consolidates all departmental budgets into an overall financial plan.
Page 7: Additional Budget Types
Flexible Budget
Adjusts based on sales and production variations.
Zero-Based Budget
Every expenditure is justified from scratch.
Sales Budget
Predicts expected sales volumes and revenue for planning.
Expense Budget
Planned expenses for various departments.
Project Budget
Specific to a project, detailing expenses and profitability.
Departmental Budget
Allocated to departments for efficient expense planning.
Page 8: Key Factors in Budget Allocation Decision-Making
Organizational goals and priorities
Financial constraints and available resources
Return on investment (ROI) and cost-effectiveness
Stakeholder input and engagement
Risk assessment and mitigation
Page 9: Business Registration Requirements
Company Registration
Register your business according to its structure.
Entity Name
Register a name for legal protection at the state level.
Trademark
Protect the business name with trademark registration.
Certificate of Incorporation
Legal document establishing business formation.
Page 10: Licenses and Permits
Permits and Licenses
Obtain necessary permits based on business activities.
GSTIN
Register for a Goods and Services Taxpayer Identification Number.
PAN
Obtain a Permanent Account Number.
TAN
Obtain a Tax Deduction and Collection Account Number.
Page 11: Legal Documents for Business
Memorandum of Association (MoA)
Legal document for business establishment.
Articles of Association (AoA)
Governs the company's operations and responsibilities.
Director Identification Number (DIN)
Necessary for company directors.
Shareholder Agreement
Establishes rights and responsibilities among shareholders.
Founders' Agreement
Outlines founders' roles and ownership.
Page 12: Articles of Association
Document listing regulations governing company operations, detailing rights and duties of directors and stakeholders.
Page 13: Legal Requirements for Starting a Business
Page 14: Business Structure Choices
Sole Proprietorship
Simplest structure, one owner, higher personal liability.
Partnership
Shared ownership among partners, shared liabilities.
Limited Liability Partnerships (LLPs) offer additional protections.
Limited Liability Company (LLC)
Protects personal assets from business liabilities.
Page 15: Business Name Registration
Register the chosen business name ensuring it's unique and reflective of your brand.
Page 16: Trademarking
Trademark slogans and logos to protect your brand’s intellectual property and ensure clarity and recognition.
Page 17: Applying for a Tax ID Number
Obtain an Employer Identification Number (EIN) for hiring employees, tax filing, and opening business accounts.
EIN is necessary for certain business functionalities.
Page 18: Documentation Requirements in India
Key documents include:
Digital Signature Certificate (DSC)
Director Identification Number (DIN)
Certificate of Incorporation
Commencement of Business Certificate
Business-related addresses, PAN, GST, and other registrations.
Page 19: Startup Document Essentials
Bylaws
Rules ensuring smooth functioning of the startup.
Memorandum of Understanding (MoU)
Formal agreements with suppliers and partners.
Licensing Agreement
Maintains control over assets or products.
Non-Disclosure Agreement (NDA)
Protects company privacy when dealing with clients/investors.
Other helpful agreements may include Intellectual Property agreements and Employment agreements.