What is a budget report?

One of the key reports for any organisation is the budget report.  Specifically, this report compares the actual performance of your organisation against the budgeted performance for the relevant time period.  It reports on whether the organisation is performing according to plan and, if not, where the variations have occurred.

The budget report should be prepared and reviewed at each committee of management meeting as it provides a guide how the organisation is performing against specific outcomes, targets or objectives.  These may be reflected in the organisational strategic and operational plans, short and long term projects or maybe investment, marketing and fundraising strategies.

Why do we need a budget report?

In a recent post we talked about the importance of the written finance report and we explained the need to interpret and understand the numbers contained in the financial report.   We noted that it is critical to understand what has occurred and why can because decisions need to be made for the rest of the year.

In the same way, the most critical element of the budget report is to not only analyse why a variation has occurred but whether the full year budget is likely to be achieved.

For example, if your income was 20% less than budgeted for after 3 months, you need to work out why this has occurred and make an assessment as to whether the full year income budget is likely to be achieved.  It could be the difference between success and failure for your organisation.

This shows why it is so important to understand the impact of the variations contained in the budget report and how they will inform and influence the decisions that need to be made by the committee of management for the rest of the year.

What do we do with the report?

I want to emphasise the point that a budget should not be seen as a static document which cannot change.  If you have identified the need to make changes then these should be reflected in a revised budget or a new forecast to the end of the year.

A carefully prepared budget report will allow your committee of management to make the right decisions to lead the organisation into a secure and profitable future.

(image by Chutiporn Chaitachawong)