eHow Business Business Management Managing a Budget Operating Vs. Capital Budget
Operating Vs. Capital Budget
By Jeff Fulton
eHow Contributor
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To many of us, the annual operating and capital budget development process is viewed with trepidation and confusion. But they are really just plans: one for the immediate future and one for the long term. While the short-term operating budget may affect how much we can wine and dine a client, the capital plan may determine whether we can meet our long-term career goals.
A capital budget may include construction of a new factory.
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A budget details a financial plan. Companies break down the plan into two types: an operating plan and a capital plan. The operating budget focuses on the day-to-day running of the company and it usually covers a one-year period. Throughout the year managers continually review the plan and measure any deviation from expected revenues and expenses as changes will affect the annual operating profit. Capital budgets focus on internal investment strategy and are usually long-term, although they may be updated annually. A typical capital budget will extend over five or 10 years.