QUESTION 62
HOW DO I MONITOR A BUDGET EFFECTIVELY?
Why it’s important: A budget/actual report has no value unless a manager uses it to exercise budgetary control.
Accountants don’t exercise budgetary control. They may issue the budget/actual report but that’s not budgetary control. Budgetary control only occurs when a manager looks at the report, identifies a variance between the budget and actual income or expenditure and takes action either to correct the variance (where it’s adverse) or to build on it (where it’s positive, for instance when sales exceed forecast).
Typically a budget actual report will be sent to account holders monthly and will look something like this:
As a manager you need to know how the budget figure to date has been calculated ...
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