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- Make sure the budget you have prepared includes all the key indicators you wish to control.
- Give responsibility for budget items only to individuals with the authority to control the outcome.
- Schedule regular reviews of budget performance.
- Review budgeted figures to identify cashflow or other problems which can be anticipated and tackled in advance.
- Compare margins, working capital and other key ratios with historical figures to identify how performance is expected to improve or deteriorate.
- Carry out a sensitivity analysis to see what effect different outcomes could have on performance.
- Focus on controlling items which could have a significant effect on overall business performance.
- As figures become available, compare actual sales to budget and identify reasons for this sales variance.
- Determine how fixed costs differed from budget and whether any changes are likely to be permanent.
- Analyse the extent to which variances in variable costs reflect sales variances, or whether prices or efficiency have changed.
- Identify to what extent variances in income or expenditure reflect differences in timing rather than performance.
- Take action to sort out underperformance which can be controlled.
- Capitalise on unexpected favourable changes.
- Revise future budgets in the light of the information you now have.
- focus on key indicators which have a significant effect on performance
- use budgets to anticipate problems
- regularly review performance and find reasons for variances
- use budget control as a prompt to action
- revise budgets as more up-to-date information becomes available
confuse changes in timing with permanent changes to the levels of income or expenditure
- ignore favourable variances without finding an explanation