Page 162 - Budgeting for Managers

Tracking Your Budget
each variance in terms of the specific account and our circum-
stances.
Underspending slightly in January is probably fine, because
it gives us more flexibility later in the year. For example, per-
haps we underspent in Education because January is a busy 145
time of year in our department and we plan most training for
the summer. But if we find that we are underspending steadily
for nine months, this could indicate that we are not following
our work plan.
The overspending in Subscriptions seems like a big problem.
But, when we take a look, we discover that we budgeted $1,200
for the year and all of the subscriptions came due in January.
So, we spent the money early, but we are just fine for the year.
We’re spending more than expected on Telephone costs.
When we check into it, we discover that we’ve been asked to do
more marketing and the expense is legitimate. We might look
into requesting additional funds for the phone bill to meet the
needs of the new marketing plan.
We get a clearer picture of how we’re doing if we look at
the actual vs. estimated expenses for an entire quarter, as in
Table 9-5.
Here, we can see that there are no more subscription
expenses, as expected. Telephone costs are doing well. We got
the requested increase in projected expenses, but then we found
a discount long distance service, so we’re spending less.
There’s only one item of major concern: Medical. We look into it
and discover that there was an end-of-year adjustment that
saved us money, but the contract for employee medical insur-
ance has increased from $1,500 per month to $2,000 per
month. We’ll need to request a variance to adjust for this.
If we have a block budget, then it’s fine to decide to spend
more on some items and less on others, as long as we do two
things:
•We do not exceed our total budget for the period.
•We inform our boss and the accounting department of the
change of allocation of funds in a timely fashion.