Controlling Your Budget

If you decide not to have a budget system then you can expect that you will undoubtedly overspend or underspend, loose control and track of financial plans and obligations and lack up to date information that could explain variances between actual results and your budget.

To control your budgets you need to do as follows:

Understand Your Budget

Know where the financial figures came from, why they are what they are, which figures you are directly responsible for controlling and which figures are out of your control.

Communicate With Your Accounts Department

Ask them what reports they can print for you so you can accurately assess your budget. Always keep the communication lines open with the accounts department so they are able track, record and allocate your money as necessary.

Set Up A Monitoring System

Your monitoring system should allow you to keep track of your budget. A paper system can be used will tally all of your costs which can then be reviewed at the end of the month.

Set Monitoring Times

You will need to decide on a time in which you can monitor your budget. This will need to fit in with your other obligations, however it shouldn’t be left because you are too busy. Your budget monitoring should never be stopped or discarded. Make sure you have a weekly, monthly or quarterly appointment set aside. If you need to involve a team ensure that your members also make that day and time available.

Identify Any Variances

You will more than likely have positive and negative variances. A negative variance means you have spent more than what your budget has allowed and a positive means that you have spent less than what the budget specifies. From this you will be able to determine the effect on your future plans and if they need to be adjusted.

Don’t Assume

A positive variance in your budget may not be a good thing. Ensure you analyse exactly why the variance occurred and what effect it will have on your future plans or other activities indicated for the year. It may be possible that you aren’t carrying out the marketing as you advised, didn’t recruit a key team member, was there a once off payment required, etc. Don’t assume anything.

Communicate With The Right People

Communication is an important contribution to ensure the business flows in the desired conduct. Just as this plays an important role in the business as a whole it also plays a role in your budget. For instance, should you find a problem with your budget you need to communicate that to the people who need to know. If you don’t communicate it, others may not know it is there.

Corrective Action

Once you have determined and communicated the budget discrepancy then you must decide on what you are going to do about it. For instance you can leave it if it can be anticipated that the budget will fall back into line (ensure you explain and verify this), prepare a forecast determining where you expect to be in comparison to your budget or suggest a corrective action that will bring the figures back in line (i.e. generate more sales, cut back on costs, etc).

Consistent Monitoring

Keep your monitoring as an ongoing process. Remember don’t assume. Just because things are working well or you have over come one problem doesn’t mean that the opposite won’t happen.

Communicate Changes

If you have altered or amended your forecast you will need to advise the right people of this. Ensure you know who they are and why they need that information.

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