Purchases budget
In one sentenceA plan of the quantities and values of goods that must be bought in the coming period to cover expected sales and the inventory required at its end.
Simply put
In a trading business you start from the sales budget: how much will you sell? Then add the inventory you want at the end of the period and subtract what you have at its start.
The result tells you how much to buy and when, so you link it to the cash budget to see whether cash is enough to pay suppliers.
Worked example
A food distribution company expects its cost of sales next quarter to be 300,000 SAR, wants to end it with inventory of 80,000 SAR, and its current inventory is 60,000 SAR.
Expected cost of sales300,000 SAR
+ Required inventory at end of period80,000 SAR
− Inventory at start of period60,000 SAR
Required purchases300,000 + 80,000 − 60,000 = 320,000 SAR
Formula: Expected cost of sales + required closing inventory − opening inventory
Don't confuse it with
Direct materials budgetThe purchases budget is for finished goods ready for sale; the materials budget is for raw materials consumed by production.
in FullScreen ERP
AI-powered purchasing in the system suggests what to order, how much, and from which supplier, based on sales, inventory, and prices. Purchasing and suppliers