Company's Financial Accounting
Master budget with example. Consolidated budget
Definition: Master Budget (in Finnish, vuosibudjetti) is a continuous strategic financial plan of the company that prescribes its future development and used by the company management for the strategic decision-making process.
As there is no one specific form of a master budget, the enterprises create different budget types following own needs and depending on the size of the business. The master (or consolidated, general) budget consists of lower-level budgets including the financial statements, cash flow forecast, budgeted profit and loss account and balance sheet. Consolidated budget represents the budget of the enterprise as a whole including budgets of the individual management entities.
The key task of the consolidated budget is to provide information about the company's business activities as a whole and to get a comprehensive overview of its finance position. Master budget is based, as a rule, on historical accounting data and forecasted financial data.
The budget usually coincides with the company’s fiscal year and can be broken down into months and quarters. Usually, company produces a master budget annually and reforecasts it regularly to respond to unexpected events in time. In order to adjust the company's plans to market changes it is worth to implement budget reforecasting process two to three times per year. Some organizations put into practice the reforecasting process on a quarterly or semi-annual basis, others even more often on a monthly basis.
Each company’s department prepare its own budget and then all these budgets integrated into the Master Budget. The core budgets that are required to form master budget can be the following:
Separately can be compiled also such budgets as:
- Production budget
- Raw materials budget
- Direct labor budget
- etc.
The Master budget consolidates all of the above budgets into one single document, where every aspect of the business should be reflected: sales price, sales volume, production costs, purchases, investments, taxes, marketing expenses, personnel salaries expenses and information about headcount changes required for budget achievement, etc. All these factors are reflected first in the separate sub-budgets and then consolidated into one main budget. The financial data of all compiled budgets are interconnected with each other, which means that numbers from one budget flow into another. The Master budget consists of two main sections: operational and financial, each of which has its own sub-budgets and different companies have their own specific set of such sub-budgets.
The compilation of Master budget is a good starting point for further financial analysis and is directly linked to the further improvement of an organization's performance.
Advantages of the Master Budget:
- The key company’s data are available in one report. The Master budget is highly useful to top management because the main information is available in a condensed form.
- It integrates and coordinates the activities of the different functional areas within the company.
- The data from separate budgets can be checked using the information presented in the master budget, and vice versa the numbers of the master budget can be verified by the data from sub-budgets. So, the data from different sub interrelated budgets and master budget can bе cross verified.
- Top management get the notion about overall estimated profit of the organization, as well as other key indicators of the company's development.
You can read more about “Budgeting and planning system” at our website.
Master budget, free download template in Excel format
English, Russian and Finnish versions
| Name | File to download |
|---|---|
| Master budget | DOWNLOAD FREE |
| Мастер-бюджет | СКАЧАТЬ БЕСПЛАТНО |
| Vuosibudjetti | LATAA ILMAISEKSI |