Types of budgets

Types of Budgets

Operating Budgets

• Operating budgets detail the planned income and expenditures for the regular operations of an organisation within a specific period, typically a financial year.
• This type of budget often includes categories such as revenues, direct costs, overheads, labour costs, marketing, and administration costs.
• In a leisure context, interesting categories might include membership income, ticket sales, or the cost of maintenance of facilities and equipment.

Cash Flow Budgets

• Cash flow budgets monitor the estimated inflow and outflow of cash within a business over a specific period.
• They help in managing liquidity by predicting peaks and troughs in the organisation’s cash balance.
• This includes tracking income from membership subscriptions or entrance fees and outgoing payments like staff wages, maintenance, or purchasing new equipment.

Capital Budgets

• A capital budget relates to significant investments in long-term assets, such as facility improvement or equipment upgrade.
• These budgets help leisure organisations plan for high-cost initiatives, such as renovating fitness areas, adding new facilities, or purchasing new, high-tech equipment.

Zero-Based Budgets

• In zero-based budgeting, every expense must be justified in each new period, instead of basing the new budget on the previous period’s budget.
• This method ensures resources are allocated efficiently, as it requires regular review and justification of each cost.
• It could be beneficial for leisure companies seeking to maximise efficiency and cut costs.

Flexible Budgets

• Flexible budgets adjust according to the actual level of activity or output of a business.
• This budgeting technique is beneficial for leisure facilities that experience significant seasonal variance or unanticipated change in demand.
• For example, a leisure park might have more visitors in summer than in winter and needs a budget that allows for adjustments accordingly.

Budgets in Leisure

• In the leisure industry, budgets might also consider variables such as seasonal fluctuations, customer demand, and the introduction of new activities or services.
• Budgets are crucial in leisure organisations to ensure quality services, maintain facilities, and make necessary equipment upgrades, all while keeping prices within a range affordable to customers.
• Regular reviews of budget adherence can help identify areas of over or under-spending and make necessary adjustments, ensuring the organisation stays financially healthy.