Just about every business has goals, whether they’re informal targets or the product of a more formal plan. But just as important as setting the right goals is monitoring your organization’s progress, including a comparison of budget vs actual revenue and expenses.
Let’s look closer at how to properly conduct these vital reviews and why they’re so critical to success.
Recall Your Goals
The first thing to do is to gather the details of any goals you and other company leaders set at the beginning of the year. This is simple for organized companies and individuals, but new organizations may want to keep track of detailed goals and plans in a central location for later review.
Take a quick look at them to ensure they’re still up-to-date, realistic, and worthwhile based on any changes in circumstances since the new year.
Assess Your Budget vs Actual
The next step involves a detailed examination of how your financial situation and business have played out over the preceding months. Here are the key steps:
Analyze Your Income
Compare your actual income from various sources with the projected income you expected when initially setting goals.
Ensure you include not only your primary income sources but also investment or interest income, in addition to any other cash flow. While it’s impossible to perfectly predict how the business will develop, you should pinpoint any significant discrepancies and flag these for later.
Evaluate Your Expenses
A granular review of how your organization spends its money is another critical step. In your initial goal setting, you should have come up with general expense categories and how much they’re projected to cost. Break down your actual expenses into these categories and see where things stack up.
Be mindful of any seasonal or irregular expenses that might not be fully or accurately represented in your expenses so far. Once again, flag any major differences between where you are and where you expect to be.
Examine Saving and Investments
Many organizations put aside money for rainy-day savings or to invest in future projects or growth. You should also review your progress toward these goals, particularly how any investments have been performing. As both savings interest rates and investment returns can shift dramatically as the overall business climate does, some adjustments may be in order.
Determine What is Influencing the Results
Now that you know what’s happened, it’s critical to figure out why.
External Factors
Unfortunately, there’s a lot outside the control of your business. Economic conditions can turn on a dime, turning a booming expansion into a painful recession in just months, or vice versa.
While the direction certainly won’t be a surprise, try to evaluate how much of an impact the overall economy is having on any discrepancies in your sales or revenue.
Remember, small changes in consumer spending patterns, unemployment rates, and other factors can have major ripples throughout thousands of otherwise unconnected businesses, including yours.
Internal Factors
On the other hand, there are some things inside your organization that can be credited or blamed for any differences from expected results. Take a closer look at operational efficiency, which can be a significant source of otherwise unseen problems.
Staffing and talent management are also critical factors. Are managers and leaders hiring the best candidates, and are they getting the most out of them?
In addition, keep an eye on customer satisfaction and retention metrics, which can tell an important story about your organization’s past and future alike.
Making Adjustments and Course Corrections
Depending on what you’ve found through your review, there are several paths organization heads can take to right the ship. First, your company may need a strategic realignment, reorienting your resources in light of new developments or needs. Sometimes, simple financial adjustments, like cutting back on unneeded spending, will do the trick.
On a more practical level, operational improvements can also have significant impacts, though they can be more involved as well. Finally, customer outreach can also go a long way toward fixing some problems, whether it’s additional advertising or promotions, or other incentives to increase business from regular customers.
Staying on Track for the Rest of the Year
There’s still a lot of time left in the year to grow, so it’s vital to set revised targets and goals for the months ahead. Use the information and lessons from your review to select and monitor key performance indicators and update timelines and milestones.
It’s also an excellent opportunity to set up regular performance monitoring plans. While these require an emphasis on proper tracking and data reporting, periodic reviews can help further finesse your operations and goals.
Make Progress Towards Your Goals with Budget vs Actual Reporting
Comparing budget vs actual data is one of the most vital tasks for keeping any business running smoothly and growing as desired. But all too many business owners struggle to find the time and expertise to properly collect, analyze, and act on this information.
Fortunately, Krieger Analytics is here to help. We’ll use our experience to help look back at past performance and make recommendations for the future in a way that fits your vision. Contact us today to get started!