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 at the same time. To keep an eye on the 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 shows the comparison between the budgeted and actual finances. Every business has a rough estimate of its expenses. Therefore, they can easily make an estimate and make a budget. However, life is unpredictable and so our expenses are. There can be a slight or significant deviation from what was planned earlier. This statement is useful for businessmen as well as for those 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 make a comparison between the real expenses that a business has faced and the budgeted expenses that a business expects to face. This comparison brings plenty of information for a business. Your budget may be a perfect plan for your finances but the 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 departments and employees of the company.

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

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 will be able to make plenty of decisions including those regarding investment.

It helps in decision-making:

When you are running a business, it is common for you 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 taken 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 because they want to make a comparison between what they planned to spend and what they spent. This comparison tells them a lot about their spending habits and also how much they have underestimated or overestimated their expenses.

The 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:

On the whole, the comparison sheet between the budget and the actual expenses is valuable for businesses that are striving to do financial planning as only the success of every business depends on how much better financial plans they come up with.

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

Those who are new to running a business can easily manage everything in an efficacious way 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 keep trying to remain attentive and careful.