Expenses to Budget Report
We all have good months and bad months so sometimes it’s necessary to look at the bigger picture. This is necessary, to simply see how well the year is going so far. The Expenses to Budget Chart is just perfect for this. This chart can also be useful when your expenses are ‘lumpy’ and don’t generally fit neatly into months. Farming is a good example of this. Expenses are incurred at planting time. Then there is some fertilising while the crops grow. Finally, you incur major expenses again at harvest time.
It’s sometimes sensible to compare our year-to-date expenses with our budget, and this report helps us do just that.
To help the cause, the Expenses to Budget chart is very visual.
The line on this chart represents your budget for the cumulative year-to-date figures each month – so this is where you should be tracking.
The bars represent the year-to-date actuals each month. For a chart showing Expenses, you generally want to see the bars below the line – expenses less than the budget.
Having said that, all budgets are just guides. They’re your business plan in numbers.
You should never cut costs just to stay within a budget. There are many reasons for cutting costs, including some very good ones. But the budget itself, on its own, isn’t one of them. The plan behind the budget may provide good justification for cutting costs. However, make sure you understand that plan and what it’s intended to achieve before cutting blindly!
Sometimes your costs are increasing because you’re doing more business. To sell more, you often need to spend more. While it’s important to manage your expenses carefully in any business, don’t lose sight of the big picture.
- Are you spending more because you’re selling more and making more profit?
- Maybe you are spending now so you will make more profit next month or next year?
Overall, timing can be tricky for cash flow but it can be managed. So make sure to use the Budget as a guide not as a rigid line that gives you tunnel vision.