Question

At what levels in the organization are budgets managed? To whom are budget monitoring reports issued? How are budget variances handled?

Answer 1

Budget is pre planning of activities to be undertaken & determine well in advance that how much cost or expenses we should incur for this particular activity.

Normally budget is managed by the top level of organization. Because the main role of top level is to move the organization to their achievement of goals. This is possible through planning regarding utilisation of resources & handling critical issues arises during the operation of business. Middle & Bottom level just execute the plan made by top level.

A budget monitoring report is a financial report that shows actual income and expenditure for a certain period compared to the budget for the same period. Finance staff should prepare budget monitoring reports regularly throughout each project, normally once per month report to the top level of management.

A budget variance is the difference between the budgeted or baseline amount of expense or revenue, and the actual amount. The budget variance is favorable when the actual revenue is higher than the budget or when the actual expense is less than the budget.

Following are the possible causes of this variance:

• Appointing low grade workers.
• Inadequate training to employees.
• Incorrect Instructions.
• Us e of sub –standard material requiring rework.
• Use of defective machinery and equipment.
• Incompetent supervision.
• Poor working conditions.
• Poor scheduling of production processes.

So we must consider each & every factor and scrutinize the reasons of being adverse of favour.