Budget variances


J

julius_hebert

When analyzing budget variances to actuals, what are some of the % or $
thresholds used. My last company would require directors to explain
variances that were either 10% plus or minus of actual or $10,000 plus
or minus of actual, whichever was greater.
 
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D

David Jensen

When analyzing budget variances to actuals, what are some of the % or $
thresholds used. My last company would require directors to explain
variances that were either 10% plus or minus of actual or $10,000 plus
or minus of actual, whichever was greater.
Whichever is greater? That's generous. I would look at most of these in
the context of volume, often a department's costs can be spot on, but if
volume dropped 7% below projection, that's not much satisfaction.

The variance triggers should vary by what level of the budget is being
evaluated. If you are a project manager and have 20 people working on
the project, any projected variance from the project should be flagged
as soon as possible. If you are doing manufacturing, but 95% of your
cost variance is related to fuel costs, then you would mention it, but
it wouldn't be cause for immediate concern.
 
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T

tkntexas

Ask yourself what is the worse case scenario. If every line item is
down 10% who bad would the bottom line be? 2% is what most companies I
have been with used to hold managers accountable.
 

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