Budget Vs Actual Statement

Whether you can manage your finances or not has a strong impact on your life. For businesses, managing finances is even more critical. To keep an eye on finances, different types of financial statements are prepared. One of the commonly used financial statements is the budgeted vs. actuals statement.

What is a budgeted vs. actual statement?

It is a document/worksheet that compares the budgeted and actual finances. Every business has a rough estimate of its expenses, so it can easily make an estimate and a budget. However, life is unpredictable, and so are our expenses. There can be a slight or significant deviation from what was planned earlier. This statement is useful for businessmen as well as for individuals who want to manage their expenses.

What role do actual vs budgeted statements play in a business?

The purpose of using this financial statement is to compare the real expenses that a business has faced with the budgeted expenses that a business expects to face. This comparison provides plenty of information for a business. Your budget may be a perfect plan for your finances, but reality is different. We have to encounter the unexpected as we move forward in our journey.

When to use the financial statement?

This sheet is usually used at the beginning of the fiscal year, and the information obtained from this financial statement is shared with all the company’s departments and employees.

When a business can see the differences and determine why the deviation from the budget has occurred and to what extent, it can make many better decisions. The more you can analyze the variation in the cost and expenses, the wiser you will be in the future when making predictions.

Budget vs actual statement template2 — [Excel Template]

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What are the benefits of the budget vs the actual statement?

There are numerous benefits to why people like to use this statement. Some of the benefits are:

It helps in performing variance analysis:

Variance analysis lets you know how much difference or variation you have seen in the actual and budgeted expenses. This analysis lets you see how much you have deviated from your planned expenses. With this, you can make many decisions, including investment.

It helps in decision-making:

When running a business, it is common to feel the need to make decisions. One of the biggest decisions is usually regarding investment. Since the future is unpredictable, plenty of decisions are made based on information obtained from past experiences. The sheet lets you make wiser and timely decisions.

It helps in comparison:

Some people use this sheet to compare their spending to their actual spending. This comparison tells them a lot about their spending habits and how much they underestimated or overestimated their expenses.

Comparison is always useful as it makes people aware of things that could be better but could not be because of their wrong decisions. Sometimes, it makes them thoughtful, and they come in a better position to make a budget that is closer to the budgeted amount.

The bottom line:

Overall, the comparison sheet between the budget and the actual expenses is valuable for businesses striving to do financial planning, as the success of every business depends on how much better financial plans they develop.

The purpose of using different types of financial statements is always to make better financial plans. The budgeted vs. actuals sheet is one powerful tool that aids in financial planning.

Those who are new to running a business can easily manage everything efficiently simply by using this financial document. In addition, they are highly useful, especially when someone wants to control their expenses but doesn’t know how to do it. This statement keeps them aware of the variance they experienced before, and they try to remain attentive and careful.