Budgets represent an integral part of the financial management of a company. A budget is the formal business and financial plan for a business for one year. It is a plan for the future operations of a company that applies financial goals and measurements to business operations. Budgets, combined with the results from the previous year, are the key measurements of financial success to which current actual financial results are compared.

The primary budget used by department managers is the annual operating budget. It contains the specific revenue goals, the specific expense amounts, and the profit objectives that the department is expected to meet. Managers use the budgeted amounts to operate their departments. They are expected to achieve the revenue budget and spend no more than the expense budgets to achieve budgeted profits.

There are three other types of budgets. The construction budget establishes the cost to physically contruct the hotel. It includes architectural drawings, design and decor engineering and all actual construction costs such as permits and fees, code compliance, materials and labor. The preopening budget establishes amounts that are expected to be spent by management to open a new hotel or restaurant. It is the dollar amount needed to cover all expenses before the hotel or restaurant opens and starts to record revenues. It is separate from the construction budget. The capital expenditure budget identifies expenditures that are necessary to replace long-term assets, renovate, or to expand the business. It is a form of capitalization.