Compare like with like
Before you worry about a number, check the budget and the actuals are measuring the same thing: same dates, same categories, same split between sites or departments. A lot of variances turn out to be timing. An insurance bill paid in March that the budget spread across the year, or a supplier invoice that arrived a week late. Those need noting, not investigating. A real change in how the business is doing is a different matter.
Decide what’s big enough to look at
You don’t need to explain every £50. Set a threshold, say anything over £1,000 or 10% of the line, and adjust it to suit your business. Then break the bigger movements down. Sales might be up because you sold more, charged more or sold a different mix of products. Small amounts still deserve a look if they point to something going wrong, like a duplicate payment or a subscription nobody cancelled.
Ask the people who know
The accounts can show that wages were higher than planned. Only the manager knows whether that was overtime to cover a vacancy, agency staff or a busier month than expected. Get that answer and write it down with the evidence behind it. “Over budget” on its own tells you nothing, and by next month nobody will remember why.
Fix the problem or update the forecast
Some variances mean something needs to change in the business: a price rise to pass on, a supplier to challenge, rotas to tighten. Others mean the original plan was wrong or out of date. In that case, update the forecast for the rest of the year, but keep the original budget alongside it so you can still see how far things have moved.
Example: a café group budgets £18,000 a month for food across three sites. In May the actual is £21,500. Split by site, two are on budget and the third is £3,500 over. £1,400 of that is an April delivery that was invoiced late, so it’s timing. The other £2,100 is a new supplier’s higher prices, agreed by the site manager. The manager moves two lines back to the old supplier, and the forecast for the rest of the year is updated for the price rises that stay.
What to check
- Budget and actuals use the same categories
- Timing differences noted separately
- A clear threshold for what gets reviewed
- A real reason behind each big variance
- Original budget kept when you reforecast
Where to start
Keep a short list each month: the variance, the cause, who’s following it up, what’s being done and whether the forecast changes. It’s more useful than pages of commentary, and it quickly shows which problems keep coming back.