How to Calculate Budgeted Revenue

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Managers may not be psychic, but a good manager should be able to predict the future with reasonable certainty. The manager's tool for predicting the future is her budget. To be as accurate as possible, a budget should not be based on pure speculation or guess work. Instead, it should be carefully decided based on factual information and past experience.

Estimate your expected revenues from sales. For each product or service, estimate the dollar value of expected sales. These should be based on your previous sales and your expectations for growth. For example, if your sales of a product were $20,000 when you expect a growth of 10 percent, your budgeted revenues should be $22,000.

Calculate you expected interest revenues. Multiply the interest rate on your savings by the expected amount of money that you will have over the course of the year. For example, if you expect to retain $50,000 in savings at an interest rate of 3 percent, your interest revenues would be $1,500.

Tabulate the amount of money that you expect to earn off of financing your sales, if you offer financing. Multiply the financing rate that you charge by the expected dollar value of financed sales to get your budgeted revenues.

Estimate any other sources of revenue that you expect to receive; each business varies and may have different sources of revenues. Base these expected revenues off previous revenues, accounting for growth just as with budgeted sales revenues.

Tips & Warnings

  • Avoid the urge to under-budget revenues. Under-estimating revenues can cause a firm to slow down production and cause severe disruptions when the results are inaccurate. Aim to have a budget that is as accurate as possible.

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References

  • "Financial and Management Accounting: An Introduction"; Pauline Weetman; 2010
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