What is an operational budget?

An operational budget is designed to outline the expected revenues and expenses for normal business operations over a specific period, typically a year. This budget is crucial for daily functioning as it helps in planning and controlling financial resources, ensuring that the organization can sustain its ongoing activities without interruptions. The operational budget includes costs related to various aspects of running the business, such as payroll, utilities, rent, and other essential expenses needed for everyday operations.

By focusing on the normal activities of the organization, an operational budget allows management to assess how well the organization meets its financial goals and adjusts for any variances. This makes it a fundamental tool for maintaining financial health and operational efficiency in a business context.