What is a static budget?

A static budget is a budget that remains introduced, even if changes in sales, expenditure or other relevant factors change. It is not uncommon for a master's or main budget of a corporation or other type of organization to be structured as a plan of static budgeting, while budgets associated with individual departments are somewhat smoother and affected by changes in sales and expenditure volumes. As a budget tool, it helps to use this model to ensure that the organization does not take over more resources than available, provided that the budget plan allows potential decreases in sales revenues by transferring funds from standby and other accounts.

with a static budget covered by the entire organization, each department or group within this organization is provided by the maximum amount of funds for work throughout the operating year. At the department's level, the aim is to find ways to maximize the use of this income, gaining notJvíce benefits when spent the smallest amount of static budget allocation. This often includes the determination of specific criteria on how the funds must be used for different expenditures, including commissions, administrative costs and other requirements.

For example, if a static budget for the company allows $ 1 million USD (USD) to pay the commission to the sales department, this department will be responsible for creating some types of instructions for how commissions are paid. Depending on the business structure, simple access to the level can work well. In order to issue a full $ 1 million in commissions during the operating year, the volume of sales may be somewhere between 19 million to $ 20 million. If the total sales volume is between $ 15 million, then the ministry will only issue a total commission of $ 750,000. With this type camp, the Ministry has some flexibility in managing your expenditureAJs and remain well within the budget limitations established by the main static budget. If the sales volume dispersion is such that the actual sales do not exceed $ 20 million, there is no need to find ways to move funds from one budget item to another to pay commissions, and the static budget remains intact.

The concept of the static budget is not limited to use in companies and other large organizations. Households can also use a general idea as a means to prevent income. By planning carefully, it is possible to set a budget that allows the maximum amount of funds to allocate each line item, and the provision is no compaction that actually spends the entire allocated amount. This creates a situation where there is a static budget in which the actual expenditure arises for a given period is less than the maximum amount for one or more budget line items. If this type of scattering occursHouseholds may decide to transfer unused resources to the next budget period, transfer sources to interest and use excess resources to some type of purchase that is out of budget. In any case, the household works with a balanced budget, a final goal.