What is the purpose of an operating budget?

The purpose of an operating budget is to project day-to-day operational revenue and expenses. This budget serves as a financial plan that outlines the expected income and expenditures over a specific period, typically one year. It helps organizations manage their resources effectively by providing a clear picture of anticipated costs and revenue generated from regular operations.

An operating budget is essential for daily operational management as it allows organizations to plan for routine expenditures, ensure they have sufficient cash flow to meet their daily needs, and make informed decisions about spending and resource allocation throughout the year. This focus on short-term financial activity differentiates it from other types of budgets and financial plans, like strategic plans or capital budgets, which might consider longer time frames and broader goals.