How to Assess Progress Against Budget

Assessing progress against budget is an essential aspect of managing projects, businesses, and organizations. Here are some steps to follow when assessing progress against budget:

1. Establish a budget: The first step in assessing progress against budget is to create a budget. A budget is a financial plan that outlines all the expected expenses and revenues for a particular period. It is essential to create a budget that is realistic and based on accurate information.

2. Monitor actual expenses: Once you have a budget, you need to track actual expenses regularly. This will help you identify any deviations from the budget and take corrective actions promptly.

3. Analyze variances: Analyze the variances between the budgeted and actual expenses. There are three types of variances: favorable, unfavorable, and neutral. Favorable variances occur when actual expenses are less than budgeted expenses, while unfavorable variances occur when actual expenses are higher than budgeted expenses. Neutral variances occur when actual expenses match budgeted expenses.

4. Identify the cause of variances: Once you have identified variances, you need to find out the cause. This could be due to factors such as changes in the scope of work, unexpected expenses, or inaccurate budget estimates.

5. Take corrective actions: Based on the cause of variances, you need to take corrective actions to bring expenses back in line with the budget. This could include reducing expenses, increasing revenue, or re-allocating resources.

6. Review and revise budget: Finally, you need to review and revise the budget regularly based on the new information gathered during the assessment. This will help you improve the accuracy of future budgets.

In conclusion, assessing progress against budget is an ongoing process that requires regular monitoring and analysis. By following these steps, you can identify variances, take corrective actions, and improve the accuracy of future budgets.