![]() The static nature of a fixed budget makes it easier to create. ![]() These considerations make it easier to forecast a static budget plan. It can also work for businesses that are not easily influenced by external factors such as inflation or competition. In a way, a fixed budget is an estimate of predetermined revenue and expenses.īecause of its static nature, a fixed budget is best-suited for businesses that operate at the same or predictable level over the year. static budget) is a type of budget plan that doesn’t change with the increases/decreases in the level of activity.įor example, whether the sales volume increases or decreases, the budgeted costs and expenses will remain the same. What is a Fixed Budget?Ī fixed budget (a.k.a. We will be exploring each type of budget first, then we’ll be comparing both to identify their differences.īy the end of the article, we should be able to distinguish one from the other as well as identify situations in which a particular type of budget is more suitable. While these two types of budgets have the same purpose of guiding a business, they do have their differences. In this article, we will be taking a close look at two certain types of budgets: fixed budget, and flexible budget. Indeed, a budget is essential for a business’s success and security. If there’s a reasonable set limit for expenses, it’d be easier to track if a business is still within budget or is already overspending. It helps a business set goals for revenue generation. With one, it’s easier to maintain financial stability. Without a budget, it’s harder to gauge a business’s performance and growth.Ī budget is an important and useful tool for any business. There’s also no set amount for expenses, so who’s to say if the business is overspending, right? There’s no set target for revenues, so a business’s management team wouldn’t know whether it is performing well or is already underperforming. Without a budget, a business might have no direction with its income. Budgeting is a meticulous but very important process for any business. ![]()
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