Using a budget to monitor
your performance.
The time you spend preparing an accurate budget will be wasted unless you refer to and use it
throughout the year. After predicting what your business should achieve each month, you need to
check that this is actually happening. Having an accurate budget at the beginning of the year helps
you monitor how successful the business is preforming in relation to the budget prediction.
Implementing a budget control process
By creating a “seasonal” budget, you will soon realize it is much easier to monitor if the values are as
accurate as possible. You will be comparing actual performance against an accurately predicted
budget and you won’t have to keep making allowances for seasonal differences.
This means that the calculation of a budget is the start of a long process. A budget is a visual plan of
what should happen to the business. You need to manage and control your budget to make certain
that you:
1. Achieve the projected income and expenditure
2. Do not exceed the projected expenditure
Having spent time producing a fairly accurate budget would be a waste of time if you merely file it
and never refer to it again. Monitoring a budget is like timing a horse that is running in a race in
order to determine how well the horse has performed.
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