The Budget Management , which studies how to plan and systematically monitor the financial results of a company, is actually a set of interrelated activities that are organized in four stages: Budget Planning, Scenario Simulation, Monitoring and Control and Budget Reviews Budget.
We have already talked here on the Budget Planning blog and today, in this new article, we are going to talk about another very important step in the process: Budget Control .
Follow and understand more about the subject.
What is Budget Control
On a daily basis, it is prudent that you control all your expenses and also receipts in a spreadsheet: the salary, the electricity bill , the cell phone, the children’s school and even the change you used to have a cup of coffee. And this act of recording everything serves to make us, at the end of the month, sure of where and how all our money was spent.
It is no different with a company. It also needs this control and care so that managers can verify if the financial resources are really being used in the best possible way, that is, they need a Budget Control process.
Much is said about the advantages of efficient Budget Planning, such as improving management processes and increasing the company’s net profit. But it is not enough to just plan, it must happen in practice. A very serious and common mistake in Budget Management is to prepare the planning, keep it in the drawer and not think about a Budget Control process .
With the planning ready and approved, the financial team must carry out monthly monitoring, comparing what was forecast with what is actually being carried out, always in accordance with the responsibilities assigned and commitments to the results assumed in the budget preparation phase. Only then will all the work done in the planning stage make sense and bring results.
In addition, the big secret to the success of Budget Control is the work carried out collaboratively by all of the team, seeking the continuous improvement of the company’s financial results , correcting and redirecting actions with a focus on ensuring that all goals and objectives are defined planning are achieved.
Budget Control: Planned vs. Accomplished
You already know that Budget Control is nothing more than monitoring the balance between what was planned and what is being accomplished . But now you must be wondering how to do that, right?
Well, making this comparison is not at all complicated. Just insert a column next to the budgeted amounts and fill in the amounts realized, always using the same parameters and the same levels of detail. After that, just do simple math to get the absolute and percentage variations.
But be careful, there is no point in elaborating an extremely detailed planning of sales structures, costs and expenses, if your company does not have the technical capacity to process all this volume of data throughout its day-to-day activities. If this happens, it will be difficult to compare the results, as the bases of analysis will have different details.
Budget Control: Accomplished vs. History
It is also interesting, in some cases, to compare the company’s performance not only with what was planned, but also with the results obtained in the same period of previous years. After all, financial managers need to make sure that the company is growing from one year to the next and only with this comparison is it possible to check this fact.
Here is an example of this type of control:
As you can see, Budget Control is not at all complex or laborious. You just need to have discipline so that all financial data is recorded correctly, in the same way that you record how much you spent for the weekend lunch in your personal spreadsheet.
The Budget Planning is very important for Budget Management, however, things do not always go as planned. Deviations, whether positive or negative, will always occur. The problem is when these deviations start to become recurrent and have a great influence on the results, which is easily perceived when you have an effective Budget Control .