Budget vs actual: what changed and why?

A budget is what you expected to happen. Your accounts record what happened. Comparing the two is useful because a missed target can have very different causes. Selling fewer jobs, discounting too much and paying more for materials call for different responses.

Compare like with like

Use the same month, accounting basis and GST treatment for budget and actual figures. Separate sales, direct costs and overhead. Then look at both the dollar difference and the reason for it.

Workshop example, before GST	Budget	Actual	Difference
Sales	$30,000	$27,000	$3,000 lower
Direct costs	$12,000	$13,000	$1,000 higher
Gross profit	$18,000	$14,000	$4,000 lower

The $4,000 gross-profit gap needs more explanation than “sales were down”. Did the workshop complete fewer jobs, charge less per job, use more parts, or have more rework? Check invoices, job sheets and supplier bills. The gross margin calculator can show how the direct-cost change affected margin.

Focus on decisions, not blame

Choose the differences large enough to change a decision. Ask the person closest to the work what happened. A one-off equipment repair may be an exception; a repeated increase in parts cost may mean prices or suppliers need review. Write the reason next to the number, not just the number itself.

For the next month, the workshop might check job estimates before accepting discounted work and ask its supplier about a recurring price rise. An owner should be named for each action and the result checked in the next review.

Keep the cash forecast separate

The budget may show a profitable month even when customers have not paid yet. Compare the profit and loss lesson with profit vs cash. Update your cash-flow forecast when actual payment dates change.

Use the business budget worksheet for assumptions, actuals and actions. If you need a clearer statement of the period result, use the profit and loss worksheet.

Important things to know

• A favourable difference is not always good. Lower wages may reflect unfilled jobs and lost capacity.
• Check timing or accounting errors before changing a business decision.
• Ask a bookkeeper or accountant to help reconcile records and explain treatment you do not understand.