Variances are a great way to evaluate performance. If a business claims to be successful yet their actual costs are consistently higher than the standard costs, we could surmise that the organization is not working effectively, that it is not conducting profitable activities, or as profitable as they could be, and that its leadership is evidently not in touch with this gap. We could say that this company is not performing well.
On the other hand, let us say that a company is consistently operating with a favorable variance, continuing to save money, exceed expectations of monthly budgets and generally operates efficiently as a result. Such companies are more appealing to investors and potential buyers. They also generate better credibility with the consumers.
Service companies don't have the same needs as manufacturing companies. Whereas manufacturing focuses on items and production and statistics, service companies dwell more in the intangibles world and is usually based on the satisfaction of the customer, rather than meeting a specific target. Variances however, may not always mean the same thing in a different company.
I remember getting this big job, and literally deciding to buy all the things I needed. I was fully confident I would have the money, as I had budgeted for it previously. Needless to say I blew my budget. Not because it wasn't effective and efficient, but because I was undisciplined and engaged in additional discretionary spending which was not captured in the budget.
On the other hand, let us say that a company is consistently operating with a favorable variance, continuing to save money, exceed expectations of monthly budgets and generally operates efficiently as a result. Such companies are more appealing to investors and potential buyers. They also generate better credibility with the consumers.
Service companies don't have the same needs as manufacturing companies. Whereas manufacturing focuses on items and production and statistics, service companies dwell more in the intangibles world and is usually based on the satisfaction of the customer, rather than meeting a specific target. Variances however, may not always mean the same thing in a different company.
I remember getting this big job, and literally deciding to buy all the things I needed. I was fully confident I would have the money, as I had budgeted for it previously. Needless to say I blew my budget. Not because it wasn't effective and efficient, but because I was undisciplined and engaged in additional discretionary spending which was not captured in the budget.
These days, I budget everything, using a phone app as well as Excel. It's the best practice, and it's what managers do. I should be able to manage my own circumstance, if i'm to be expected to, and trusted with, manage a department or division for a company. Mobile budgeting should be making its appearance in corporations soon. It's about time that managers get the ability to monitor their budget variances on demand, on the go.
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