As budgets are only estimates, once you have created your quick budget, we recommend you review your budget at least monthly to see if your business is actually performing in line with your budgeted expectations. This will help you spot problems early on and enable you to manage your cash flow effectively and once you have looked at this, you may need to update your budget expectations.
When reviewing your budget consider:
1. Doing a budget comparison: Compare your actuals with what you have budgeted. To create & view a budget comparison report, click here.
2. Ask yourself what this tells you. Below are some things to consider
· Analyse reasons for any shortfall
· Consider reasons for a particularly high turnover
· Compare the timing of your income/expenditure with your projections and check that they fit
· Look at how your fixed costs differ from your budget
· Check that your variable costs are in line with your budget
· Analyse reasons for changes in the relationship between costs and turnover
· Analyse any differences in the timing of your expenditure
3. On a regular basis (monthly or quarterly) and also before beginning the next year’s budget, interpret the results and look at trends to help you make decisions on production levels, plant and equipment purchases and which opportunities to take advantage of. This involves looking at what happened during the past budget period, what is happening now and what you expect to happen in the future.
Things to consider:
· Market Trends: Are markets contracting or expanding?
· Production and marketing: What worked last year and what didn’t?
· Expenses: Look for opportunities to decrease expenses to increase profit.
· Change: What improvements can be made?
4. If there any changes, what do you need to do? If you need to amend your budget, we strongly recommend you make a copy of the budget and do the variation on the copied budget. For instructions on copying your budget click here.
5. Don’t forget to update your budget.