Operating budget
The operating budget provides an overview of the costs of running your
business. In other words, the operating budget gives you an overview of the
company’s day-to-day expenses and income. It gives you a chance to
calculate an estimated profit.


Structure of the operation budget
All operating budgets for a commercial company follow this structure:

Sale / Turnover
- Variable costs / used goods
= Gross profit
- Fixed costs
- Depreciation
- Interests
= Profit

Sale / Turnover
Sale / turnover means the 'the money you receive from the customers'
when they have purchased a product or service from you.
• If you sell 10 pairs of shoes at 100 $ your sale / turnover will be 1.000 $
• If you sell 5 hours of consultancy service at 75 $ per hour your sale
/turnover will be 375 $.

Any sales tax will not be a part of the budget. Sales tax will be accounted
for separately.

Variable costs / used goods
In the second line of the operating budget deduct all expenses directly
connected with the sale. The more you sell the higher variable costs.
• If you expect to sell 10 pair of shoes you have to buy 10 pair of shoes.
• If you expect to sell 7.000 pair of shoes you have to buy 7.000 pair of
shoes.

The buying of shoes is directly connected with the selling of shoes (used
goods).

If you produce leather shoes you have to buy leather (raw material). The
purchase of leather will show as variable costs / used goods in the budget.

Consultants rarely have expenses concerning the “variable costs / used
goods”. E.g. an accountant has few direct expenses in producing the yearly
accounts for a client. Maybe 20 sheets of paper. They use “hours of work”.
This expense will be found under Fixed costs.




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