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Budget

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Rural Technology

Before starting any work, budgeting of the expenses is necessary. It is very useful to us. Its uses are givan below –

  • If activity-wise funds required are known, provision for funds can be made.
  • If there is two or more option, best option can be selected.
  • Area’s of cost reduction can be found out and worked out.

Budget helps to understand, deficit or surplus in income. Every year finance minister presents budget for the country. If there is deficit then taxes are raised to meet the deficit. Similarly every organization makes budget. It is advisable that every household should have its budget. Following are commonly used budget types:


Estimation

When customer has not yet made up his mind for purchase and studying option. Businessmen give him estimate. It is approximate calculation of raw material, labour and money required for a particular service or task or product manufacturing. The details are likely to change as per the material used, process performed or market situations. Estimate is to help customer to select appropriate option.

Quotation -

A time-bound, written surety about the price of certain service or Product, given to the customer based on the estimation of that particular Service or Production process. Sometimes, quotations assure a guaranteed sale for the seller and assure a guaranteed supply to the customer. Quotation helps customer to select best option for him.

For example: Ashish Shinde decided to construct a house. He got two quotations from contractor.

  • Mr Patil contractor :
  1. Material: Rs.50000/-
  2. Labour: Rs.20000/-
  3. Painting: Rs.4000/-
  4. Electrical fitting: Rs.6000/- (standard brand electric fitting)
  5. Plumbing: Rs.4000/-
  6. Total: Rs. 84000/-
  • Ms. Shraddha contractor :
  1. Material: Rs.48000/-
  2. Labour: Rs.20500/-
  3. Painting: Rs.4000/-
  4. Electrical fitting: Rs.4500/- (normal make)
  5. She does not take plumbing work.
  6. Total cost without plumbing: Rs.77,000/-

Ashish Shinde wanted to have standard electric fitting with standard accessories. He asked Ms. Shraddha to provide electric fitting of standard make. This will increase the cost by Rs.1500/-. Similarly, Mr Ashish found there is local plumber, who does the plumbing job on labour rate basis. His labour charges was Rs.500/-. Material cost of plumbing is Rs.2700/-. Therefore, Mr. Ashish gave contractor to Ms. Shraddha with following modification: Material: Rs.48000/- Labour: Rs.20500/- Painting: Rs.4000/- Electrical fitting: Rs.6000/- (standard make) Plumbing work from outsider: Rs.2700/- (material) + Rs.500/- (labour) = Rs.3200/- Total cost: Rs. 81700/- Thus quotation helps us in taking decisions.

Cash Flow Statement

While executing a job, customer generally pays at the time of delivery. To meet payment of supplier or for labour payment, entre

reneur has to spend money. A statement showing timetable of requirement of funds and receipt of funds is called as cash flow. It is a schedule showing cash received and paid over a certain time period. We will study cash-flow statement using a example. For example: A Poultry Farm owner needs to prepare a Cash Flow Statement, based on the following information -

1. If an order of a batch of Broiler birds is given 2 months in advance then only the fulfillment is assured and full payment needs to be done at the time of booking.

2. The sale amount is received within 15 days from the day of sale.

3. The order for the Poultry food is to be given 15 days in advance.

4. Medicines and cages are available immediately. Hence, the owner prepared a Cash Flow Statement as follows table 1. The conclusions based over this Cash Flow Statement are:

1. Even though the transactions begin in January, he has to invest 2 months in advance, i.e. in November.

2. Even though at the end of a session the business seems to be in profit, there are times of deficiency (at the end of months February, April, June). So if some financial provision is not made for meeting these deficiencies, the progress is bound to halt.

3. If this deficiency is recovered from the initial investment, in small installments, then slowly this deficiency will be ceased.

4. If the advance payments of food and birds is done in small installments, say, 25 % or so, and the remainder is paid at the time of receiving the food or birds, then this periodic deficiency can be avoided.

5. Or if all transactions are done through Bank account, due to assurance of repayment, this deficiency can be demanded from the bank on interest basis. Thus, the Cash Flow Statement help to support the business and explore various means to smoothen the ups-and-downs of the business. Budgeting Budget is a list of all planned expenses and revenues. This is necessarily related to the monetary matters. This is liable to deviate + / - 5%. e.g. The budget of a Yuvak Mandal is shown in table. 2 as follows - This Budget reveals some options viz. arrange another program within the Savings amount, or reduce expenses over other two items, increase the Savings and arrange a bigger program or keep the Savings in the Bank account and get some interest etc. This way the Budget helps to plan the financial matters.

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