Financial Budget for Graphic Design

To: Owner, Graphic Design

From:

Subject: Financial Budget for Graphic Design

Budgeting is a method used to plan for forcasting production and sales volume. The effectiveness of Graphic Design’s operational activities largely depends on how accurately the company has made these forecasts. A flexible budget, in this case, is one that can be adjusted easily to show budgeted revenue, costs, and cash flows at different levels of activity. Usually when a company uses a standard fixed budget, they tend to fail to analyze the reasons for the difference between the actual and expected levels of activity. A flexible budget can be used to evaluate the efficiency of a department throughout the business even if the actual level of activity differs from the management’s original estimates. If a change in volume lessens the usefulness of the original budget, a new budget may be prepared quickly to reflect the actual level of activity for the period.

The importance of a flexible budget depends on the accuracy of the classification of expenses into fixed and variable ones. Due to various factors beyond our control, a flexible budget allows you to make adjustments when certain activities go beyond or don’t meet expectations. For example, if the environment changes unexpectedly, a flexible budget will also place Graphic Design in a better position to accommodate these changes and make timely, operational adjustments to make the best decisions necessary. Also, if Graphic Design has a change in sales or production volume, a flexible budget gives us more cost control because it shows where the actual performance deviated from the planned performance. With a flexible budget, Graphic Design will be able to recognize the variability of costs and incorporate any change in levels of activities by preparing budgets for different levels of activity.