An Operating Budget Solution to a Capital Budget Problem

Financing is often called an operating budget solution to a capital budget problem because it allows for the payment of equipment, technology or systems out of the monthly cash flow of the business, broadcaster, or media related firm. A capital budget offers a point in time plan to fund a specific purchase such as a transmitter, a camera, a switcher, or some other type of broadcast, lighting, sound or media technology. An Operating budget is more fluid and considers the ebb and flow of income the way it occurs naturally in a business, studio, station, production facility, stadium, concert hall, etc. Capital budgets are effective for planning regular (especially current or next year) expenditures such as the systematic costs that come with people, salaries, benefits, the purchase of bulk goods, the acquisition of another enterprise, the steady need for certain supplies or materials used in the business. However Operating budgets are effective for planning and allocating funding and payments for technology that produces income, creates savings or otherwise can be amortized over an extended period of time beyond the one year Capital budgeting cycle. Many firms now choose to allocate capital budget funding for current year or next year costs while utilizing the Operating Budget to allocate funding for equipment, systems and technology that has a multiple year useful life or that depreciates over an extended period of time. Larger companies with multiple stations often control the capital budget at corporate headquarters while allocating an annual Operating Budget to the local station General Manager, or Chief Engineer. Consider Operating Budgets as a means to "spread the cost of technology to match the timing of revenues and cash flow.