Budgets
In today's lecture with Peter, we looked into organisations using budgets.
A budget is an allocation of money (or resource) in order to undertake a particular task. Maybe a project, or a time period, or both. An allocation is only proposed however, therefore a budget is usually inaccurate as it is a guess.
Budget - proposed resource allocation.
Actual - Actual resource used
Variance - Difference between the two. (Positive, negative, neutral)
Cumulative variance - All of the variances added together.
They are there to help understand where and how your money is being spent which then help to save money the next time around. Over time the information gathered from previous budgets will help to create a more accurate budget for the future.
It is always good practice to create a safety net out of the budget that you receive. An example of this would be getting a £100,000 budget and taking 10% of that as a reserve. You would then have a budget of £90,000 to work with, and if things go wrong somewhere along the line, you will still have money to fix the problem. Your data sheets should always be up to date, always taking the variances that you accumulate off of the budget.
