May 09
23
How Do People React in Budgets and Variances
Now consider the budget and the underlying process. This is one of the most internal controls in any company. The budget, in fact, is your primary financial control. The information that you get from variances can help you save money for the company in very direct and immediate ways. Ignoring variances is like failing to collect money that’s due from a customer, or leaving the electricity on day and night in large plant. These things cost money. So does failing to use the budget.
In those companies where budgets and variances are taken very seriously, how do people react differently than in other companies? Some of the major differences are listed below:
• Variances are acted upon when found.
• Negatives are reversed and positives are protected.
• The process is reviewed month to month.
• Budgeting itself is a lean and efficient process.
• Revisions are not undertaken to hide errors, but to improve controls.
• Everyone keeps sight of planning goals.
