A budget enables a business to accurately forecast its expenses over a specific period of time. Once a company knows what its expenses are for a specific fiscal period, it allocates funds to cover the expense. Many budgets start with a snapshot of a prior fiscal period, because a business incurs many of the same expenses on a recurring basis. However, when an expense appears in the budget for the first time, or when the amount of a budgeted item increases significantly over the prior fiscal period, supporting details explain and justify the expense.
A company's human resources budget includes salaries, benefits, bonuses and taxes for its personnel. Supporting details for this budget item may include a summary of the previous fiscal year's staffing budget and an explanation that this year's expense is higher because staff received a pay raise in the prior year. The supporting detail for a temporary worker expense may be an explanation that a full-time employee is taking maternity leave during the fiscal year, and the budgeted expense covers the cost of her replacement during the leave.
Travel and Entertainment
The travel and entertainment budget includes air travel, ground transportation, meals and promotional entertainment expenses. Supporting details for this budget list the events that the budget includes: attendance for three employees at four national trade shows, for instance, plus one customer dinner per month and quarterly team-building luncheons. The supporting details provide enough information to justify the budgeted amount.
Increases in material and labor costs result in higher operating budgets. Some of the details a manager may submit to support a request for a higher budget may include a breakdown of increases in material, labor, transportation and other expenses. Supporting information in the budget may detail which expenses, such as taxes, are fixed, and which expenses, such as advertising, are variable.
Legal expenses -- particularly litigation -- are a challenge to forecast because it is difficult for a company to predict the lawsuits that may be filed against it in for the coming year. Supporting details for a company's litigation budget may include an explanation of the number of lawsuits that the company defended over the last several fiscal years and the expense associated with each lawsuit. Providing supporting details gives the finance team information sufficient to adjust the forecast if it believes the details do not accurately reflect the budgeted expense.
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