What is a solid budget?

Fixed budgets are budgets that are developed on the basis of specific criteria, and do not allow any space for any changes or changes in the activity at any point in the period of time to which these budgets are related. For enterprises, this means that a solid budget for a calendar or an operational year is developed and will never change during that year, even if there are changes in the level of business activities that are occurring. This is true whether the company records a sudden increase in profits or sales.

A solid budget is a different budget approach than a variable or flexible budget. With a flexible budget, there are provisions for revision of specific line items based on the level of income generated during the year. On the other hand, the solid budget is carefully created to remain in place throughout the quoted period. This approach helps to ensure that each department within the organization always knows exactly how much they have to spend at the beginning of the period and how much remains at a given point during the budget periodand.

One of the advantages of a fixed budget is that each part of the document is developed on the basis of historical data and the current financial status of the subject. It is not uncommon for the budget itself to include the provisions for the transfer of funds from savings or other types of financial shares in the event that income turns out to be insufficient to cover all line items within the budget. For example, a religious designation can propose an operating budget based on a number of gifts received in the previous period. The same budget will include the provisions for the transfer of money from a type of contingency account if the gifts for budget time show less than the supposed. This approach helps to improve the chances of balancing a balanced budget, regabez RDS what activity takes place during this period.

It is important to realize that although a solid budget during the calendar year is notThe data, which are recorded in this period, will have a direct impact on how a fixed budget is developed for the next period. If sales in the previous budget period increase significantly, there is a great chance that the upcoming budget will reflect this increase in sales, so it relies less on savings and similar assets to balance the budget. At the same time, if sales in a given period decrease, the solid budget for next year will take into account this data and may be more reliable on savings to cover the upcoming budget.