How Do I Perform a Gap Analysis?

Budget variance analysis is to determine the amount of variance and the reason for the variance by comparing actual implementation results with budget goals. If there is a significant difference between the actual results and the budget standards, the management of the enterprise should carefully investigate and determine the cause of the occurrence in order to take appropriate corrective measures.

Budget variance analysis

Right!

Budget variance analysis is to determine the amount of variance and the reason for the variance by comparing actual implementation results with budget goals. If there is a significant difference between the actual results and the budget standards, the management of the enterprise should carefully investigate and determine the cause of the occurrence in order to take appropriate corrective measures.

Chinese name

Budget variance analysis

Industry

economic

Nature

noun

Types of

budget

The analysis of budget differences is conducive to the timely discovery of problems in budget management, and is the most important basic means on which its control and evaluation functions play a role.

Clarifying which part of the budget variance analysis is in the entire budget management process helps people understand its operating mechanism, but it has different understandings. For example, taking the annual budget as the standard, some people think that budget monitoring is mainly a difference analysis, some people think that the budget control mechanism and analysis mechanism are two independent parts, and some people put

1. Quantitative analysis of budget differences. Quantitative analysis should adopt the proportional analysis method,

1. Determine the analysis object and decomposition standard

While preparing the annual budget, the budget management committee will determine the object of budget variance analysis and the principle of variance decomposition.

First, determine the object of the difference analysis. The budget items that are suitable for difference analysis have the following characteristics: they have a more important impact on the realization of budget goals; cost driver data can be accurately obtained: there is a relatively definite correspondence between the cost and its driver, such as Linear relationship.

Second, determine the decomposition criteria. The Budget Management Committee, based on the actual situation of the company, based on the principle of difference decomposition, formulates the difference decomposition standards for the main cost and expense items, including: the degree of difference decomposition; the data source and collection method for each item's difference decomposition; the corresponding subdivisions of the difference correspond Responsible party.

2. Collecting Information

During the execution of the budget, the budget execution and control room performs information collection according to the requirements of the difference decomposition standard. Including: financial information during budget execution; important external market information; non-financial information within the company.

3. Difference calculation and decomposition

After the execution of the monthly budget, the budget execution and control room calculates the budget differences for each item according to the collected information, and decomposes the differences according to the difference decomposition standard to determine the responsible department of the difference. According to different reasons, the budget execution and control room can ask the corresponding responsibility center to explain the reasons for the differences.

4. Judge the importance of differences

The budget management committee formulates standards for the importance of differences based on actual experience, and the budget execution and control room measures the actual budget differences that occur according to this standard, and determines the important differences that need to be explained by the relevant responsible department.

The standard of importance of difference can be determined according to the different nature of the project: set the difference rate, that is, the difference that exceeds a certain percentage is an important difference; set the difference amount, that is, the difference that exceeds a certain set amount is considered important Difference; the trend of difference change, that is, the difference in which the difference continues to grow for several consecutive months is regarded as an important difference.

5. Explain important differences

After determining important differences, the budget management committee requires each responsible unit to explain the reasons for the differences. There are many reasons for the differences in budgets. Only a part of them is revealed and eliminated through the decomposition of the differences. A comprehensive explanation of the differences in the budget requires each responsible department to conduct an in-depth and quantitative analysis of its operating activities based on the decomposition of the differences. Make judgments on its controllability and possible impact in the following months.

6. Report and confirm the causes of differences

The analysis results of each responsible department are summarized in the budget management committee and reported to the company's executive level. The executive level of the company reviewed and confirmed the cause of the differences.