Tips For Your Year-End Budget Deviation Analysis
Conducting an end-of-year Budget Deviation Analysis is a must for every small and self-employed business owner. In it, you compare how your business actually performed relative to how you had forecast it would perform.
Going through this process, not just at the end of the fiscal year, but also each month, is extremely important. This comparative analysis allows you to gauge how well your business is doing to determine if you are meeting goals or where potential problems may be arising. It also gives you vital insight about any assumptions that didn’t turn out quite as you had expected. For example, actual sales may be lower than expected if the marketing techniques you chose weren’t as effective as you planned or if market conditions turned out differently than predicted. Going forward, you can now use this knowledge to better adjust your strategies.
While this all may seem complicated, a Budget Deviation Analysis can actually be quite simple as long as you are well-prepared. Here are some tips to help you get the most benefit from your Budge Deviation Analysis:
- Schedule a dedicated time | Though relatively simple, a Budget Deviation Analysis can take time. Set aside a specific time period so that you can focus your full attention on your analysis. While it may not be demanding your attention with the same force as other activities in your business, it is at least just as important as anything else. Give it the time and consideration it deserves.
- Organize all your financial data month by month | The more organized you are in your analysis, the more valuable information you will be able to gather. By breaking down your profit and loss data into month-by-month statements and aligning accounting reports with your budget, you will have access to an extra level of granularity that otherwise wouldn’t be available.
- Have all expense reports and receipts on hand | Expenses are often the reason for significant differences in predictions. In order to fix the problem, knowing how much you spent is not enough. You need to know what you spent your money on as well. Keeping organized expense reports will tell you exactly where your spending went out of control.
- Find the right template | Though you may want to create your own template from scratch, this can be an extremely-time consuming process. Instead, we recommend that you look to one of the many existing Budget Deviation Analysis templates available online. Some are very effective, while other make the process much more complicated than it needs to be. Part of the challenge is finding a template that fits your business, which is why we have created an interactive template that is designed specifically for small and self-employed businesses.
Knowledge is your best friend when running a business. Your Budget Deviation Analysis is a powerful opportunity to gain valuable insight into your own company’s performance. Use it so that you can plan better for the future, worry less, and make more money!