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Monitoring and Controlling a Business Budget

Monitoring and Controlling a Business Budget
Reading Time: 3 minutes

Budgeting is a catalyst for business success. Having a budget allows businesses to grow, enhance their operations, and minimise the effects of any unexpected costs.

As a result, businesses can thrive and find new opportunities in their markets and industries.

What is a budget? A budget is a financial plan that gives guidelines for spending and sets financial targets for businesses to achieve.

Budgeting identifies current available capital, provides an estimate of expenditure, and anticipates incoming revenue.

To optimise business success, we will deliver suggestions for monitoring and controlling a business’ budget.

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Monitoring the Budget

After assessing all of the financial details needed to create a business budget, it is important to monitor the budget for optimal effectiveness.

Giving other individuals responsibility over certain areas of the budget, (by department, business unit, project, etc.), is a great way to make sure that it is closely considered in day-to-day operations.

Scheduling regular meetings to discuss budget details will also ensure that the budget is not only being considered but is being discussed.

To make sure your business’ budget is on track, Select recommends the following:

  1. Collect figures as they become available.
  2. Compare actual numbers with budgeted amounts.
  3. Cite reasons for positive and negative variances.
  4. Classify reasons as a trend or unique incident.

After using the previous tips to monitor your business’ budget, below are some signs that it is on track:

  1. Variances are minor.
  2. The reasons for any variances are already known and predicted.
  3. The reason for a negative variance is due to a unique incident and not a trend.

Budgetary Control Using Variances

variance is the difference between actual and planned results. Variances may be favourable or adverse, depending on whether a good or bad thing has happened.

The calculation of variances allows managers to better monitor the performance of their business.

It allows the variances to be analysed, the reasons to be examined, and the decisions to be made.

By using the variances, managers can produce more accurate budgets in the future, which will help with planning and control.

The following list of formulae shows how to calculate different variances:

1. Material Variances:

Material price variances may occur if a discount is given, a business found a cheaper supplier, or there has been an unexpected rise in prices.

Material price variance = (budgeted price – actual price) x actual usage

Material usage variances may occur because of careless work creating waste, inefficiency, or a machine breakdown.

Material usage variance = (budgeted usage – actual usage) x budgeted price

2. Labour Variances:

Wage rate variances can be caused by the activities of trade unions, the supply of labour. and government regulations.

Wage rate variance = (budgeted wage rate – actual wage rate) x actual hours

Labour efficiency variances are affected by the productivity of the workers, training, and the reliability of the machinery used.

Labour efficiency variance = (budgeted hours – actual hours) x budgeted wage

3. Sales Margin Variances

Sales margin price variances may arise due to changes in market conditions or unplanned changes in prices.

Sales margin price variance = (actual price – budgeted price) x actual sales

Sales volume variances can occur for many reasons. Changes in consumer tastes, the action of competitors, and changes in marketing techniques are a few causes.

Sales volume variance = (actual sales – budgeted sales) x budgeted price

Conclusion

Budgeting is more than just numbers; it’s a strategic roadmap for business success.

As the business world changes, staying on top of your financial game through effective budgeting remains crucial.

Equip yourself with the right knowledge and let a well-maintained budget drive your business forward.

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© 2023 Select Training & Management Consultancy LLC. Tax Registration Number: 100003031000003.

Head Office: Office 1501 Al Yasat Tower, Fatima Bint Mubarak (Najda) Street, P.O. Box 44705, Abu Dhabi, UAE.

Dubai Office: Office 208, Al Attar Business, Centre, Sheikh Zayed Road, Al Barsha 1, P.O. Box 334058, Dubai, UAE.

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Al Taawun District, P.O. Box 84994, Riyadh, K.S.A.

Request a call back

Slots are limited, so request your call back as soon as possible.

Discover Select

Select Group is an internationally recognised Learning and Development provider with more than 17 years of experience in the field of corporate training and consultancy.

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Delegates
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Happy Clients
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Training Hours

✔ Qualified Trainers

✔ English & Arabic Delivery

✔ Innovative Customer Focus

✔ International Qualifications

Our partners

Head Office: Office 1501 Al Yasat Tower, Fatima Bint Mubarak (Najda) Street, P.O. Box 44705, Abu Dhabi, UAE.

Dubai Office: Office 117, Al Attar Business, Centre, Sheikh Zayed Road, Al Barsha 1, P.O. Box 334058, Dubai, UAE.

© 2023 Select Training & Management LLC. Tax Registration Number: 100003031000003.

Request a call back

Slots are limited, so request your call back as soon as possible.

Discover Select

Select Group is an internationally recognised Learning and Development provider with more than 17 years of experience in the field of corporate training and consultancy.

1 +
Delegates
1 +
Happy Clients
1 +
Training Hours

✔ Qualified Trainers

✔ English & Arabic

✔ Customer Focused

✔ Internationally Qualified

Our partners

© 2023 Select Training & Management Consultancy LLC. Tax Registration Number: 100003031000003.

Head Office: Office 1501 Al Yasat Tower, Fatima Bint Mubarak (Najda) Street, P.O. Box 44705, Abu Dhabi, UAE.

Dubai Office: Office 208, Al Attar Business, Centre, Sheikh Zayed Road, Al Barsha 1, P.O. Box 334058, Dubai, UAE.

KSA Office: Office 7470, Uthman ibn Affan Road,
Al Taawun District, P.O. Box 84994, Riyadh, K.S.A.