Budget planning and variance analysis
Planning your budget is one thing, but sticking to it is a totally different kettle of fish. We empower you to do both with a comprehensive and adaptable budget planning and variance analysis service.
Giving you clarity, structure, and strategic insight, our experts work with you to build realistic financial plans that make sense and hold up to scrutiny. Whether you’re running a startup looking to scale, a community-driven not-for-profit, or a fast-paced creative agency, we help you stay on top of things when they change with variance analysis that keeps you in control.
What is budget planning and variance analysis?
Budget planning is, perhaps unsurprisingly, the process of planning your budget. This means setting financial goals and limits by forecasting income and expenses for the months or years ahead. Essentially, it’s your financial game plan that keeps you on top of things instead of falling behind.
Variance analysis is the comparison of projected figures with your actual numbers. It’s a great way to find gaps and why they exist, so you can take the necessary action.
While budget planning is about the future, variance analysis is about the recent or current situation. Together, they give you a dynamic, comprehensive view of your finances, with not only the nuts and bolts of your numbers but the story of how they all tie together.
Why is budget planning and variance analysis important?
A business needs a well-built budget to function, which stops it from running into issues that could have been easily prevented.
In a nutshell, budget planning and variance analysis can work wonders for your business, helping you:
Set achievable, accurate financial goals.
Spot overspending and course correct.
Understanding under- or over-achievement of sales targets so you can take appropriate action.
Manage investor/stakeholder expectations with clear data.
Link strategy to performance for business-wide accountability.
How budget planning and variance analysis support business growth
Ambitious businesses need a clear plan to hit their objectives, whether hiring the right people at the right time, investing intelligently, or scaling with financial stability. Budget planning and variance are crucial to achieving all of these goals and more, and they help you identify underperforming (and overperforming) areas early so you can intervene effectively.
They also allow you to allocate assets strategically and prevent financial bottlenecks, and ultimately, justify decisions with clear numbers to board members, finance providers, and your team.
This helps you respond with agility rather than alarm, so you can progress and maintain viability for years to come.
Six common business budgeting mistakes and how to avoid them
There are some mistakes many businesses make when it comes to budget planning and variance analysis. These include:
1. Being unrealistic with budgets
Many businesses set their budgets based on best-case scenarios, which is optimistic at best and seriously damaging at worst.
Instead of having your head in the clouds, base your budget on historical data if it’s available, assumptions based on evidence, and build in contingencies where possible.
2. Setting and forgetting the budget
Setting a business budget isn’t something you do as a one-off task. Even if you only check it once a year, you’re missing a trick that could wreak havoc on your organisation.
Instead, schedule quarterly reviews so you have a more realistic idea of where you stand. During these reviews, gauge how close the reality is to your budget and adjust accordingly if needed.
3. Failing to track variances in real time
Variance analysis doesn’t work if you don’t track things regularly. If you do this, you won’t know something has gone wrong until it’s too late.
Cloud-based accounting and reporting can help you flag variances quickly and automatically, which we can help set up or run for you.
4. Ignoring the smaller variances
“It’s only a few hundred quid” is something we hear a lot from business owners, and while it’s true that some smaller variances fall below the threshold of materiality and can be safely ignored, others shouldn’t be dismissed so quickly.
This is because seemingly minor discrepancies can point to deeper issues or trends that, left unchecked, could cost your business far more in the long run.
5. Not involving the right people
Budgets set in silos within your business don’t work out in the real world. If the relevant heads of departments aren’t involved, your budget won’t reflect operational reality.
To get around this, make your budgeting a collaborative effort. This helps improve accuracy and accountability.
6. Failing to update budgets after big changes
New people, new projects, new economic conditions. Things change in the world of business, and your budget should reflect them. Otherwise, it’s pointless.
To avoid this, update your budget after any major shift, either external or internal, so your budgets evolve as you do.
How we can help
From budget planning to variance analysis, we give you the tools, insights, and support to improve your financial decision-making so you can be proactive instead of reactive.
Our offering is vast and varied and includes:
Collaborative budgeting support to build realistic and achievable plans.
Variance tracking system implementation to flag over- or underperformance.
Scenario planning to help you prepare for different outcomes.
Stakeholder reports to show where things stand and why.
Performance dashboards that link financial data to business KPIs.
We can also train your team on how to interpret and respond to budget variances so you can make better decisions as a business.
Whether you’re just getting started or have been operating for years, our services are tailored to your business and industry, with a particular speciality across the Scottish SME landscape.
This includes everything from healthcare to hospitality, sporting organisations, not-for-profits, creative agencies, and more.