What Is the Connection Between Cash Flow and Capital Budgeting?

The financial budget is a budget that reflects the cash receipts and expenditures, operating results, and financial situation of a certain period (budget year) in the future. An important part of the business operating budget. The contents of the financial budget generally include "cash budget", "estimated income statement" and "estimated balance sheet (estimated balance sheet)". Among them, the cash budget reflects the cash income, cash expenditures and cash vacancies caused by the production and operation and investment activities of the enterprise during the budget period. The estimated income statement reflects the business performance of the enterprise during the budget period, that is, sales revenue, variable costs, The composition of fixed costs and net income after tax; the expected balance sheet reflects the financial status of the enterprise at the end of the budget period, that is, the source of funds and capital occupation, and their respective composition. ^[1]

Financial budget

Financial budget

A financial budget is a series of reports that specifically reflects the expected financial status and operating results of an enterprise over a certain period of time, as well as cash income and expenditure

Preparation of sales budget

Preparation of production budget

Preparation of direct material budget

Compilation of taxes payable and additional budget

Preparation of direct labor budget

Preparation of manufacturing cost budget

Preparation of product cost budget

Preparation of ending inventory budget

Preparation of sales expense budget

Preparation of management cost budget

Preparation of operating decision budget

Preparation of investment decision budget

Preparation of cash budget

I. Fixed budget and flexible budget

A fixed budget, also called a static budget, is a budget method that determines the business volume of an enterprise's budget period at a certain estimated level and uses this as a basis to determine the estimates of other projects.

The budget system includes four parts: budget policy formulation, budget preparation, daily management, and review and improvement. Of these, daily management is the most important.

Financial budgeting is the key to the success of the entire budget system. The daily management of the budget usually refers to the design and application of daily management reports. Its basic concepts are as follows:

1. Daily management reports should be designed in line with budget items. A daily management report may contain multiple related budget items, but each budget item should have independent fields, and have subtotals and monthly accumulations for convenience and budget comparison. Such as sales revenue and

Financial budget is business

Comprehensive budget is based on

1.1 Inadequate budgetary staff

Many companies competent departments have a lot of vague understandings about how their budgets work. Many companies have developed a series of seemingly strict financial budget system documents only for their own enterprises to be recognized by other units. However, enterprises should not take financial budget as their own management system to supplement the gaps in the enterprise management system, but should use enterprise budget management as a boosting method for corporate strategic development. We should not only pay attention to the enterprise's financial budget system, but also Pay attention to the implementation and implementation of financial budgets in enterprises.

1.2 Establishing an Enterprise Financial Budget Management System

In the implementation of corporate financial budget management, many enterprises do not have a dedicated corporate budget management organization, most of which are managed by the corporate financial department, and some are managed by the planning department. Corporate financial budget management is not guaranteed by the organizational department. Conflicts and contradictions often occur in the work, and there is no coordination committee in the company to coordinate. Secondly, the lack of a relatively complete financial budget system in enterprises is also a common problem in today's enterprises. This makes many enterprises very simple when it comes to financial budgets, makes corporate financial budgets work anonymously, and there is no strict standard for corporate budgetaries to follow. It has effectively carried out the financial budgeting work of the enterprise and lost its due role.

1.3 Lack of sufficient understanding of the actual effects of the budget

In the enterprise that realizes the financial budget, the relationship between financial budget management and corporate strategic management is not handled well, causing the enterprise to focus only on the role of planning, coordination, and control, but not on the role of financial budget in the actual management of the enterprise.

1.4 One-sided understanding of enterprises

Many companies believe that financial budgets are purely financial behaviors and should be fully managed and controlled by the financial department of the enterprise. With the strengthening of modern corporate awareness, corporate budgets have formed a comprehensive budget system such as business budgets, capital budgets, and profit budgets. As a system in the budget, the financial department only provides the principles and methods for budget preparation for various departments, and summarizes and analyzes various budget data. Therefore, corporate financial budget management is a comprehensive management behavior of an enterprise. It should be organized and commanded by senior management personnel of the enterprise, and coordinated by various departments such as business, investment, fundraising, and management. Therefore, we cannot consider the financial budget as the corporate financial department. Complete tasks independently.