Budgetary planning

Introduction to Financial Statements in Power BI

Nikisha Alcindor

Investor and Data Scientist

Financial statements recap

Balance sheet

Adheres to the accounting equation
Snapshot of what a company owns and owes
Assets = Liabilities + Owner's Equity

Income Statement

Revenues and expenses for a specific period of time
Covers key metrics such as
- Gross Revenue & Net Revenue
- Gross Profit & Net Profit
- EBITDA

The importance of budgeting

Budget

A formal financial plan that solidifies company goals annually

Benefits

Reduces financial surprises
Coordinates company activities and helps focus on future goals

Example

Useful when expanding our lemonade and juice store to new locations

Budget

Budgeted balance sheet

Plan for anticipated expenditures and debt obligations (often yearly)
Based on previous and current year budget
Account for future company changes

Example

Next year we take out a loan of $1000 to invest in a new lemonade stand.
We can incorporate that in the budget
Assets = Liabilities + Owner's Equity
$1000 = $1000 + $0

Lemonade and juice store in a new location

Actual vs. Budget analysis

Budget

An estimated amount over a period of time ($1000 for a lemonade stand)

Actual

The exact amount over a period of time
($1100 for a lemonade stand)

Analyzing Actual vs. Budget

Financial efficiency and accuracy
Predict future outcomes

Lemonade and juice store in a new location

¹ https://www.investopedia.com/terms/b/budget.asp

Financial forecasting

Financial Forecasting

Estimation of future financial outcomes
Based on historical data
Monthly or quarterly updates

Benefits

Designed to provide updates for immediate action
- Created for short long-term goals

Example

Impact of good weather on # of juicers

Lemonade and juice store with sun in a new location

Budgeting vs. Forecasting

Budget: Created to meet a goal (Annually)

Financial Forecasting: determine if budget goals will be met (revised frequently)

Example

Budget estimated $200 of juicers for the year (assets).
The owner plans to invest $100 of his own money in two new juicers.
Total assets for juicers is $300 instead of $200.

Lemonade and juice store with sun in a new location

Budget variance

Budget Variance = Actuals - Budget

A diagram of the basic accounting equation.

Example

More juicers then expected that were bought with the owner's money ($100).
Assets = Liabilities + Owner's Equity
$100 = 0 + $100

Image of multiple juicers

Let's practice!

Introduction to Financial Statements in Power BI