Operating budget

An operating budget provides insight into whether you expect to make a profit or loss in the next 3 years. The operating budget is the translation of your company ambitions into financial numbers. Another word for this budget is the performance budget.

Why an operating budget?

In the operating budget, it becomes clear what minimum turnover you need to achieve in order to cover the costs and make a profit. You draw up this budget for yourself and for external financiers. The operating budget is part of the financial plan.

Example – Business space

If you rent commercial space, you incur costs. Such as the monthly rent, service costs, and perhaps additional costs. These costs are all included in the operating budget.

5 steps to an operating budget

1. Determine turnover

Determine how much turnover you expect in the next 3 years. State the turnover per year.

2. Determine purchase value

Determine the purchase value (or purchase costs) and subtract these from the turnover. This is how you determine the gross profit.

3. Provide insight into operating results

Add up all other business expenses, such as personnel, business space, internet/telephone, insurance. You also list the depreciation of your business assets as costs, under the heading of depreciation. Subtract all costs from the gross profit, this is the operating income. Operating income is also known as net profit from business before tax.

4. Deduct taxes

Deduct the income tax and the income-related health insurance contribution from the operating result.

5. Calculate net profit

Determine the amount that remains. That is the net profit. Your business income comes from this profit. You can choose to keep part of your profit in your company or use it for repayment or expansion.

Example operating budget

Turnover
400.000

Minus: purchase value turnover
150.000

Gross profit
250.000

Rent
20.000

Depreciation
15.000
Promotion and communication costs
10.000
Transport
10.000

Administration
10.000

Staff
75.000

Insurances
10.000

Energy costs
10.000

Minus: total costs
160.000
Net profit
90.000

Tips for the operating budget

  • Create several realistic scenarios.
  • If you have already received assignments or orders, include them in the explanation.
  • Keep in mind that personnel costs are approximately 30% higher than the gross salary due to costs for pension and employer insurances.

Do you need help drawing up your operating budget? Then engage a bookkeeper or accountant via NOAB (in Dutch) or NBA.

Difference between operating budget and liquidity budget

In an operating budget, you budget amounts per year. These amounts are exclusive of VAT. In a liquidity budget, you show your income and expenses per month or per quarter. This ultimately provides an overview on an annual basis as well. You state VAT in a separate column. This provides additional insight into the VAT settlement every quarter and therefore a more specific insight into the (monthly or quarterly) balances of your liquidity budget.

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Do you have a question about financing or money matters? Contact the Netherlands Chamber of Commerce KVK Financing Desk free of charge: 0800 10 14.

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