Budget Variations In The Budget

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Used the budget to control performance and expenditure. I would measure budget performance, you need to monitor the extent to which budget estimates match actual results. This helps ensure financial control and identify where change is required. Monitoring budget accuracy is the responsibility of all managers. Effective monitoring of budget performance requires that managers be provided with relevant, timely and accurate information appropriate to their level of responsibility. It also requires managers to provide feedback in a timely manner about underlying causes and effects of budget variations, as well as planned actions to manage variations. Identified the cause of variations from budget. Most budgets analysts calculate a variance by…show more content…
Specific variances – actual figures v expected figures – this includes • Actual v budget • Actual v Forecast It is unlikely that you will be perfect at budgeting (unless you have a crystal ball), so you are bound to get variances at least occasionally. Generally, small variances are simply part of doing business, large variances need investigating – but don’t get complacent; think of it like testing for lumps, or checking moles – you need to get a foundation of what is NORMALLY a bit over or a bit under before you can understand WHAT IS ODD… and this only comes with practice. Trend variances – small, continual changes over time, that incrementally diverge from expected. • this month’s v last month’s • August 2010 v August 2011 – both actual and budgets What can seem normal, can seem so because we are used to it. Trend analysis is a bit like watching your weight; when you check your scales each day, it only seems like tiny changes, but if you look at this birthday compared to your weight last birthday that is when you notice the few extra kilos have snuck on … Trend analysis puts a spotlight on the changes that creep up on us little by…show more content…
What typically happens is that a relevant invoice has not yet been received or a payment relating to this period was made in an earlier period. In either case variances will arise in both the month the invoice was expected and not received, and the later month when the invoice is entered but not expected. The idea of ‘Accrual accounting’ is to recognize all the income and outgoings for the period in that same period, irrespective of whether cash has passed between customer and supplier. Timing variances “reverse” because what was short this period will appear in the next, or what was extra in this period will be missing next period. i.e. when the two months are added together, you end up in the right spot overall. If they are explainable as “reversing” in the next period, other than ensuring the expected reversal takes place then no further action need be taken. The most powerful question you have at your disposal is WHY did this variance occur? The difference could simply have arisen because of a data entry typo – don’t panic or go yelling and the wrong people for the wrong things! Begin by making sure what you are looking at is accurate. In all other cases a Budget Variance is the result of either: * A price that was different from

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