Bridging the Gap Between Financial Modeling and Budgeting

Financial model and operating budget are two different things, but the two should correlate with and complement each other. I'm going to briefly discuss the differences, what each is used for, and how to use them more efficiently run and improve your business.

Differences
Operating budget, by contrast, is mired in the details. This should tie directly to the accounting system to the general ledger or chart of accounts for QuickBooks users, and is usually month by month forecast of activities each account for the next 12 to 24 months. Using the operating budget includes an analysis of budget vs. actual performance for each month.

How and why would they related?
Must have a business and financial model and operational proračun.Proračun without long-term model / forecast leaves the company rather directionless and without the ability to understand the impact of business decisions on financial rezultat.Financijskog models without the operating budget is "pie-in-the-sky "dream that is not grounded in reality. There is no way to monitor progress towards achieving objectives, even if they are listed, and it is almost impossible to hold anyone accountable. Every business should have both.

Operating budget should be confirmed and supplemented by the assumptions in the financial model, and vice versa. In fact, the monthly review of budget vs. actual performance can often generate valuable information about our assumptions and can justify the changes and update regularly the financial model.
For example, let's assume that the project is 50% gross profit in the 5-year financial model. Due to changes in the economy, increasing material prices and a slight change in product mix, our gross profit comes in every month at 45%. We find and follow in our analysis of the operating budget each month. Since the trend seems to be consistent, we may decide to update the gross profit assumption in the financial model.

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