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6 Types of Budget Estimate

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Budget estimates are forecasts that are used to plan strategy and budgets. A budget is a plan to spend money to achieve objectives. Estimates are required to prioritize strategy based on factors such as return on investment and risk. When a strategy is approved, the same estimates are used to plan budgets and implement budget controls. The following are the basic types of budget estimate.

Cost Estimates

Estimates of capital and operating expenditures. Cost estimates may require a strategy to be planned out in enough detail to identify required work and purchases. Estimates may be based on expert opinion, parameters and robust techniques such as reference class forecasting.

Revenue Estimates

Revenue tells a firm how much money they can potentially spend in a budget independent of current assets and borrowing. Revenue estimates also impact cost. For example, a firm will have more cost for materials if they sell 4 million units as opposed to 1 million units.

Business Activities

Estimates of business volumes such as customer call volumes. This has an impact on cost and strategy. For example, a marketing team may budget more than last year if product launches will increase by 50%.


Based on cost and revenue forecasts, a return on investment or similar estimates of future cash flows can be calculated. This is a common way to prioritize spending. For example, a project with a 83% return on investment may be more attractive than a project with a 10% return.


Identification and analysis of risks to develop risk estimates for significant expenditures. For example, a project with 50% return and little risk may be more attractive than a project with 60% return that is high risk.

Cash Flows

Estimates of cash inflows and outflows based on when revenue and costs occur in time. This is done to ensure that revenue, budgets and funding activities provide a firm with ample liquidity.
Overview: Budget Estimates
Forecasts that are used to plan strategy and budgets.
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An overview of the common types of budget.

Capital Budgeting

A definition of capital budgeting with examples.

Budget Planning

A definition of budget planning with examples.

Cash Budget

A definition of cash budget with examples.


The common types of estimates.

Reference Class Forecasting

An overview of reference class forecasting as an estimation technique.


Projections of costs, task completion times and resource needs for a project.

Story Points

An overview of estimating with story points including planning poker.

Parametric Estimate

A definition of parametric estimate with examples.

Basis Of Estimate

A definition of basis of estimate with examples.

Cost Analysis

The common types of cost analysis.

Level Of Effort

The definition of level of effort with examples.

Technical Requirements

An overview of technical requirements with common examples.
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