In the budgeting process, which step logically follows forecasting revenues?

• A. Set objectives
• B. Establish revenue projections
• C. Estimate expenses
• D. Build the budget

Answer: (C)

Forecasting revenues shows what the organization expects to bring in, so the next step is to estimate expenses. Knowing expected costs (both fixed and variable) allows you to see how resources will be allocated to support the revenue plan and to identify any gaps between projected income and spending. This sets up a complete picture for the master budget, which combines revenue projections with expense estimates to form the formal financial plan. Set objectives typically guide the whole process and come earlier, while building the budget comes after you’ve estimated both revenues and expenses.