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What Is a Budget Estimate?

Mary McMahon
Updated May 16, 2024
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A budget estimate is a preliminary assessment either of funds projected to be available to a company or agency, or of funds required to complete a project. These estimates provide valuable information for planning purposes but are not final. As final information comes in, staff members can update the document and determine if any changes are causes for concern. These documents may be available to the public when they involve publicly funded agencies and projects, to allow members of the public to participate in the budgeting process.

In the case of an estimate of available funds, a budget estimate is usually issued by a regional government or agency. The document discusses possible sources of funds like tax revenues, grants, monies from government agencies, and revenues from fines and fees. This provides information about the available operating budget. Staff members and other parties with an interest can review the estimate to learn more about funding priorities and the various funding options that may be available. Funds set aside for specific purposes are marked in the estimate to make people aware that they are not part of the general fund.

Other budget estimates determine the costs associated with a given project or assignment, like building a bridge or completing a home. This document breaks down expected expenses, given the available information. It can cover costs for permits and fees, labor, supplies, and other expenses that may arise. The budget estimate can also discuss the timeline and provide information about what may happen if the project goes into overtime because of unexpected events.

Firms preparing project bids for clients typically need to prepare a detailed budget estimate to make the client aware of all the potential expenses. This estimate is typically valid for a limited time only. If the client waits too long, costs for supplies, labor, and other expenses may rise with market forces, and the estimate will no longer be accurate. The budget estimate also typically includes an entry for predicted overruns, so clients are aware of how much money might be added to the expenses by the end of the project.

In reviewing a budget estimate, it can help to read individual categories with care to understand what they mean. If definitions are unclear or the document is vague, the person who prepared it should be able to provide information. Budget estimates can also include alternatives; a construction firm might, for example, discuss the costs of different kinds of shingling in the document so the client can learn about how various choices may affect the overall cost of the project.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

By discographer — On May 29, 2014

There are advantages and disadvantages to a budget estimate. The disadvantage is that, since it's an estimate and not the real data, the information may not be accurate. This is an issue if there are unexpected expenses or revenue.

The advantage is that when the real numbers come in, a comparison can be made between the estimate and the real data. This comparison can be made for a better estimate for the next business term.

Businesses who use a fixed budget have to deal with budget estimates all the time. So they are familiar with these advantages and disadvantages.

By turquoise — On May 28, 2014

@donasmrs-- You can do what I do and put together a spreadsheet. Make a column for income and another column for expenses. This way you can keep track of what is left of your budget every month and it will also keep you from overspending.

You do need to make some calculations to set up a budget. You need to add up all of your monthly income, or if you're not sure of what it will be, make an estimate. Do the same for expenses. Expenses are easier to estimate because you can add up expenses from previous months. You should calculate different category expenses separately, like groceries, utilities and rent separately.

By donasmrs — On May 28, 2014

How can I prepare a personal budget estimate?

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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