What Is Budget Monitoring?
Entrepreneurship.org notes that monitoring a budget involves performing a regular comparison of projected financial costs and gains against actual performance numbers. Discovering the variances between budgeted amounts and actual financial performance allows management to determine how well a company is meeting goals. Monitoring the budget also functions as a powerful cost management tool for businesses.
The World Meteorological Organization reports that companies often create and approve an annual budget at the beginning of the year detailing estimated costs and expected income. At the end of each month or quarter, the company monitors the budget to determine what changes need to be made in how the company operates. Gaps between budgeted numbers and actual numbers can be quickly identified, analyzed and addressed to help better control costs and devise strategies to meet sales or other income goals. In a case where the budgeted numbers are consistently and significantly different from actual numbers, the company can re-evaluate its budgeting procedures. The company can then propose a revised budget that more accurately forecasts expected performance, costs and goals.
According to the World Meteorological Organization, it may be necessary to create a budget monitoring report at every level of a company’s accountability. This type of report should address the variances found during budget monitoring along with an explanation of why they occurred for upper management review.
