Operating Budget

Download an operating budget template

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What is an Operating Budget?

An operating budget consists of all revenues and expenses over a period of time (typically a quarter or a year) that a corporation, government (see the U.S. 2017 Budget), or organization uses to plan its operations.  An operating budget is prepared in advance of a reporting period as a goal or plan that the business expects to achieve.  Below is an example of a downloadable budget template and an explanation of how to prepare one.

Operating Budget Template Screenshot

Download the Operating Budget Template

Download the free Excel template now to advance your finance knowledge.

Components of an Operating Budget

The main components of an operations budget are outlined below.  Each business is unique and every industry has its nuances, but these items are general enough to apply to most industries.

#1 Revenue

Revenue is usually broken down into its drivers and components.  It’s possible to forecast revenue on a year-over-year basis, but usually, more detail is required by breaking revenue down into its underlying components.

Revenue drivers typically include:

  • Volume (units, contracts, customers, products, etc.)
  • Price (average price, per unit price, segment price, etc.)
#2 Variable costs

After revenue, variable costs are determined.  These costs are called “variable” because they depend on revenue, and are often calculated as a percentage of sales.

Variable costs often include:

Read more about variable and fixed costs.

#3 Fixed costs

After variable costs are deducted, fixed costs are usually next.  These expenses typically do not vary with changes in revenue and are mostly constant, at least within the time frame of the operating budget.

Examples of fixed costs include:

  • Rent
  • Head office
  • Insurance
  • Telecommunication
  • Management salaries and benefits
  • Utilities
#4 Non-cash expenses

An operating budget often includes non-cash expenses, such as depreciation and amortization.  Even though these expenses don’t impact cash flow (other than taxes), they will impact financial reporting performance (i.e the figures a company reports at the end of the year on their income statement).

#5 Non-operating expenses

Non-operating expenses are those that fall below Earnings Before Interest and Taxes (EBIT) or Operating Income.  Examples of expenses that may be included in a budget are:

#6 Capital costs in an operating budget

Capital costs are usually excluded from an operating budget.  The term operating refers to a statement of operations (income statement) which does not include capital expenditures.

Most companies prepare a separate budget for capital investments.

A diagram showing the importance of budgets

Video Explanation of Types of Budgets

Below is a short video that explains the various types of budgets, what they’re used for, and why they matter to corporations.  You’ll quickly learn the differences between the three main types of budgets (operating, capital, and cash).

Additional Resources

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Budgeting Head

Project Budget

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Analyst Certification FMVA® Program

Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.


Financial Analyst certification curriculum


A well rounded financial analyst possesses all of the above skills!


Additional Questions & Answers

CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.

In order to become a great financial analyst, here are some more questions and answers for you to discover:


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