Operating Budget Definition: Everything You Need to Know

ByVladana Donevski
June 15,2022

What is an operating budget? This is a question that many business owners ask themselves, so this blog post will discuss the operating budget definition, the importance of this document, and how to create one for your company.

Defining an Operating Budget

An operating budget is a plan outlining your expected expenses, revenue, and profits for a specific period. It can be helpful to think of your operating budget as your financial roadmap. Similar to a business plan, it’s meant to keep your business fund management on track.

When you create and follow an adequate operating budget, you are more likely to achieve your financial goals.

The Importance of Following an Operating Expense Budget

There are many reasons you should have one, but the crucial incentive for developing a budget is avoiding financial difficulties. When you clearly understand your expected income and expenses, you are less likely to overspend or get into debt.

How To Create an Effective Operating Budget for Your Business

There is no "right" way to create an operating budget. However, there are some key elements every sensible operating budget should include. Most operating budgets include how much revenue companies expect, variable and fixed costs, non-cash and non-operating expenses, and sometimes capital costs.

Variable Costs

The variable costs section included in the operating budget consists of:

  1. Direct labor budget
  2. Direct selling costs
  3. Sales budget: Sales volume and sales needs
  4. Payment processing fees
  5. Raw materials fees
  6. Some aspects of marketing
  7. Other market variables

Fixed Costs

Some of the fixed expenses you might include in your annual operating budget are:

  1. Rent for office
  2. Insurance
  3. Telecommunication
  4. Salaries
  5. Utilities

Your total operating budget should also include non-operating expenses, such as taxes, interest, gains, and losses.

Non-Cash Expenses

Make sure to write up non-cash expenses, like the amortization and depreciation of your assets. While these expenses won't affect your cash flow immediately, they will leave a mark on your company's income statement at the end of the reporting period.

The Elements of an Operating Budget

First, you will need to gather your company's financial data. The data used in your business budget, for example, can come from financial statements, tax returns, and bank records.

Then, you will need to analyze them to identify your business's strengths and weaknesses, as well as its expected operating cash flow for the year, to create a budget that reflects your findings.

Finally, once you have created your budget, it is essential to review it regularly. This will help you make adjustments as needed and ensure you remain on track toward your financial goals. It might seem like a hassle, but you should define your operating budget before making big financial decisions.

Tips For Staying On Track With Your Operating Budget

Even if you have the best intentions, it can be challenging to stick to your budget if you don’t consult it frequently. While unexpected expenses are to be, well, expected, and they might be significant, it still helps to document the things you can predict. Here are a few tips to make as much of that as possible:

  • Make your budget realistic. If it’s too restrictive, you will likely give up on it altogether. An operating budget with room for unexpected expenses is beneficial, especially since sales and overhead figures vary greatly.
  • Create a system for tracking your expenses. Include this in your operating budget expenditure section. This can be as simple as keeping a notebook in your purse or wallet, or using a budgeting app on your phone.
  • Review your budget regularly. This will help you identify areas in need of adjustments. 
  • Don't be too hard on yourself. If you occasionally make a purchase that’s not in your budget, don’t waste time on regrets. Return the item if it’s not necessary, or make it pay for itself. Both are good ways to get back on track.
What are the 5 main components of an operating budget?

The five main components of an operating expense budget are revenue, costs, non-cash and non-operating expenses, and capital costs.

What is an operating budget for a nonprofit?

An operating budget for a nonprofit is a financial plan that outlines the organization's expected income - i.e., grants and other forms of financing - and expenses. The operating budget can help the nonprofit achieve its financial goals and avoid debt.

What is meant by operating budget?

The definition of an operating budget is that it’s a financial plan that details your company’s expected income and expenses for a specified period. It’s important to create and follow an effective operating budget to achieve your financial goals, avoid debt, and keep your business on track.

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The acronym "APR” stands for “Annual Percentage Rate” and refers to the total share of your principal you will be charged within a year on your credit cards, personal loans, auto loans, or other lines of credit. This figure represents the actual yearly cost of borrowing funds, including any fees or additional charges that may apply, which is why it’s a more informative number than just the interest rate. APR on a credit card can be fixed or variable, which will define how your APR is calculated. Fixed-rate APR means your credit card interest rate will remain the same for the life of your loan. Variable APR means that your rate can change over time, usually in response to changes in the market.  Both have their up-and downsides: Fixed APR allows you to make long-term plans, but it might be costlier than necessary in the long run, if the market becomes favorable. 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By Vladana Donevski · June 14,2022
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You’ve worked hard to bring visitors to your website or product, and now it’s time to show your appreciation with a well-crafted Thank You page. A Thank You page is more than just a static page with the words “thank you” plastered across the top. It’s an opportunity to continue the conversation, nurture the relationship with your consumers, and turn a one-time visitor into a lifelong customer. These pages are a great way to show your guests that their business is valued.  We’ve compiled a list of Thank You page examples across the industry. Use them as inspiration for your own pages, and watch your conversion rate soar. What Is a Thank You Page? A Thank You page is a web section that is displayed after a visitor submits a form on your landing page or completes an action, such as making a purchase. It’s designed to show appreciation for engagement with your brand to your prospects and customers. 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Once they hit it, they’ll be taken to another page where they can input their contact information and preferences. This can be your one-time chance to get the visitor’s attention, so include a strong CTA that encourages them to confirm their subscription and start shopping, downloading, or reading your content. The best Thank You page examples we’ve examined ensure the whole process is as easy and frictionless as possible. The last thing you want is your visitors to get frustrated and give up before they even get to the confirmation page. 2. Thank You for Downloading If you offer an ebook, a white paper, or other downloadable product on your website, you might want to consider using a Thank You page. Studies have shown that providing value-added content on the page can increase customer satisfaction and loyalty.  All the examples of download Thank You pages we’ve reviewed are displayed right after a visitor downloads a piece of content from the website. Even though the item is usually delivered to customers’ emails, pages often show a link to the downloaded content. This ensures they’ll be engaged on your site and open the material immediately.  Other than that, download Thank you pages also invite the visitor to take further action, such as signing up for your newsletter, purchasing another product or service, or following the brand’s social pages. 3. Thank You for Attending The page that expresses gratitude for attending an event is next on our list of Thank You web page examples. It’ll be shown after a visitor signs up for a webinar, class, or live seminar. Its purpose is not only to confirm the attendance but to encourage the attendee to add the event to their calendar. This page should include a message of appreciation and a CTA to encourage visitors to sign up for your next event, leave feedback, or get a coupon code. It’s also important to include all the relevant event information on this page, such as date, time, and location. Clear communication will ensure your attendees have all the information they need to plan for your next event. A well-set Thank You page will also include a link to the event photos and videos. Visual content will help create a sense of community and encourage the visitor to spread the word about your event. You might want to consider recording it and making it available on the Thank You page if it's a webinar. This will allow attendees to watch the replay if they missed anything or share it with someone who couldn’t attend. 4. Thank You for Participating Good examples of Thank You page content would be appreciation messages asking the participants to share the survey or contest with their friends. It’s best to include a link to the contest rules or the survey results so that participants can see how their input helped shape the outcome. That way, you’re building goodwill and fostering a sense of community among your customers. Most of the Thank You page text examples we reviewed came with a social media share button to make it easy for participants to share the survey or contest with their followers. This, in turn, will help you reach a larger audience and generate more leads. Let’s not forget that only 29% of brands nurture their existing customers beyond the initial purchase. Don’t be one of them! 5. Thank You for Purchasing A Thank You page for purchasing is displayed after a visitor completes a purchase on your website. These post-sales notes usually include a confirmation message, and an upsell offer to encourage customers to buy more. Aside from these examples of Thank You page upsells, another valuable CTA asks the customer to write a review or product testimonial. You could display these reviews on your website or social media platforms to build social proof and trust with potential customers. Customer reviews and ratings are important because they help build trust and credibility with potential customers. Some businesses even hire management companies to polish up their customer feedback. This type of Thank You page should also include a link to the product manual and warranty information so the customer can easily find it if they need to reference it. Thank You pages for websites may include a customer service contact in case of any questions or problems with the product. By providing this information, you’re showing that you’re available to help if needed and that you care about your customers’ satisfaction. 6. Thank You for a Donation Even though donors are technically not buying a product or service, they still appreciate being thanked for their donation. Receiving feedback about how you’ll use the money can’t hurt as it assures that their contribution will positively affect society. We’ve gone through lots of donation Thank You page examples and realized that most of them also include a CTA that encourages the donor to spread the word about their cause or make another donation. By including a CTA, you’re helping generate more donations and raising awareness about your cause. And finally, remember that many crowdfunding platforms include a form to collect the donor’s contact information. This is a neat way of keeping donors updated on campaign progress and thanking them for their continued support.  7. Thank You for Being a Patron Many podcasters, YouTubers, and influencers earn by creating Patreon pages and communities to gather support for their work. While researching Patreon Thank You page examples, we’ve often seen short videos from the creator expressing their gratitude. Followed by statistics on how patron support has helped them grow and a CTA asking patrons to share the page with their followers, it helps increase the page’s visibility and could potentially result in more sign-ups. You can utilize your Thank You page to express how grateful you are and how patron support has helped you grow. Most Patreon communities are tight-knit, so it’s important to show that the support of each patron is valuable and appreciated. Some of the Thank You page examples we’ve reviewed list patrons, with the option for them to remain anonymous. It’s a great way to show transparency and build trust with your audience. Finally, some pages offer a voucher or discount for the patron’s next purchase. Clever Ways of Using the Thank You Page Now that we’ve seen the different types of Thank You pages, let’s take a look at some of the ways you can utilize this powerful tool: Increasing Social Media Engagement A “thank you for visiting our website” message is the perfect tool to increase social media engagement. You can include buttons with links to your social media profiles. Don’t forget to use this opportunity to encourage customers to leave a review for your product or service on their favorite platform.  If you find it overwhelming dealing with social media, you can use content management tools to help you schedule and publish content and track your performance. Collecting Customer Feedback A Thank You page is an excellent opportunity to collect customer feedback by adding a survey or questionnaire to the page. It’s a valuable way to collect data you can use to improve your business. Cross-Selling Products or Services Another great way to use a thank you landing page, according to available examples, is to cross-sell products or services. The easiest way is to attach links to items related to the one the customer had purchased to your page. You can also include special offers or discounts on this page to encourage customers to make another purchase. Upselling Products or Services Try upselling products or services by including links to higher-priced items to further boost your sales. Adding special offers or discounts to this page will likely encourage customers to upgrade their purchases. Getting Referrals Word of mouth is one of the best ways to grow your business, and a Thank You page is the perfect place to ask for referrals. You can usually find Thank You page samples with a pre-set CTA asking customers to refer your business to their friends and family. If you offer an incentive for customers who make a referral, you’ll get an even better response and grow your customer network.  Offering Content Recommendations Finally, a Thank You page is a great place to provide your customers with content recommendations if you have a blog or website. Simply add some links to related articles or blog posts that would be of interest to your visitors, or offer a subscription to your newsletter or RSS feed. Common Mistakes On the Thank You Page (With Examples) Now that we’ve gone over ways to use your Thank You page let’s look at some common mistakes the website owners make. Avoiding them will help you make the most of this section of your website. 1. Not Customizing the Thank You Page Not customizing the Thank You page for each customer can be a big turn-off for some. This page is your chance to establish a personal connection with the customer and show them that you value their business. Add the human touch by including the customer’s name or a personalized message to add credibility to your website. 2. Not Including a CTA For the best Thank You pages, make sure to include a CTA. Asking customers to refer your business or subscribe to your newsletter are good actions to be taken. Without a strong CTA, you’re missing out on an opportunity to engage with your customers. Design your Thank You page with conversions in mind and make it easy for visitors to take action. You will likely see a high bounce rate if your page isn’t optimized for conversions. 3. Failing With the Design Your Thank You page should be consistent with the rest of your website, especially with the landing page. It will create a cohesive customer experience and make visitors more willing to take action on the page. Failing to grab your customers’ attention with a catchy Thank You page design can result in them leaving the site without taking any action. 4. Flooding the Page With Content Another common mistake is flooding the page with too much content. Too much information can overwhelm customers and cause them to leave the site. Adding more than four or five lines to the page can be too much for customers to digest. Also, it can result in visitors not noticing your CTA. So, keep the content on your Thank You page concise and to the point. 5. Not Tracking Performance We’ve seen many “thank you for your purchase” page examples without the necessary metrics to track performance. Without tracking, you won’t be able to determine what’s working and what isn’t. As a result, you may continue using ineffective strategies or miss out on opportunities to improve your page. Make sure to include metrics such as conversion rate and bounce rate to track the performance of your Thank You page. Bottom Line Thank You pages are a valuable tool that improves customer engagement and encourages them to take further action. By avoiding common mistakes and including a strong CTA, you can make the most of this important section on any eCommerce website. As a result,  you’ll see an increase in conversions and a decrease in shopping cart abandonment.
By Danica Djokic · June 24,2022

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