Budgeting

Budgeting and Performance Reporting

A budget the business is actually measured against, and periodic reporting that explains the variance — rather than a spreadsheet nobody opens after July.

Per period
Actual vs budget
Few KPIs
Chosen to drive behaviour
Variance explained
In words, not just numbers
KPI dashboard showing performance against budget

Most budgets fail for the same two reasons. They are built by extrapolating last year rather than from what the business intends to do, and once set they are never compared to anything. A budget that is not measured against actual results is a wish. The value is entirely in the comparison, and in the conversation the comparison forces.

Useful budgeting starts from operational reality — the jobs, headcount, capacity and pricing the business is actually planning — and turns that into expected revenue and cost by period. Then each period the actual result is compared against it, and the variance is explained: not just that gross margin was down three points, but that it was down because a job was priced before a materials increase, which tells you what to change.

What’s included

What this covers

  • Annual operating budgetRevenue and cost by period, built from planned activity and capacity rather than last year plus a percentage.
  • Variance analysisComparison of actual results to budget each period, with the drivers of each material variance identified and explained.
  • KPI selectionChoosing the small number of indicators that genuinely predict this business’s results, and defining them precisely.
  • Periodic reporting packA consistent report each period showing results, budget, variance and the indicators, in a format that gets read.
  • Departmental or job reportingWhere the business has distinct divisions, sites or job types, reporting that separates them instead of averaging them away.
  • Budget revisionReforecasting when something material changes, so the business is not measured for months against a plan that is no longer real.
Management reporting charts on a screen
Who it’s for

Who this suits

Businesses managing to a target. Where the owner has a result in mind for the year and wants to know each month whether it is on track.

Businesses with multiple divisions. Where a strong overall result can hide a division that is losing money, and only separated reporting reveals it.

Owners with a management team. Where responsibility is shared and people need a consistent, agreed set of numbers to be accountable to.

Process

How it works

1

Build from activity

The budget is built from what the business plans to do — volumes, pricing, headcount, capacity — not from an uplift on last year.

2

Agree the measures

A short list of indicators is defined precisely, so the same number means the same thing every period.

3

Report and explain

Each period the actual result is set against budget and the variances are explained in terms of what happened.

4

Act and revise

The report drives decisions, and the budget is reforecast when reality changes materially rather than pretending it has not.

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What this page covers — and what sits elsewhere

Alongside the financial budget sit a small number of indicators that lead the results rather than follow them: utilisation, average job value, conversion rate, debtor days. Choosing few and measuring them consistently beats a dashboard of thirty. This work depends on accurate underlying records from bookkeeping and financial reporting, and pairs naturally with the timing view from cash flow management.

Related services

Works well with

Cash Flow ManagementThe timing view that sits alongside the profit view — a business needs both to be safe.Read more Bookkeeping SolutionsThe accurate, timely ledger that makes any variance analysis trustworthy.Read more Business AdvisoryWhere a persistent variance points to a pricing, cost or structural decision that needs making.Read more

View all accounting services

Questions

Common questions

How is this different from the management reports I already get?
Management reports tell you what happened. A budget gives you something to measure that against, and variance analysis explains why the two differ. Without a budget, a monthly profit figure is just a number — you cannot tell whether it is good, and you certainly cannot tell which decision caused it.
How many KPIs should we track?
Fewer than most businesses start with. A handful that genuinely drive the result, measured consistently and defined the same way every period, will change behaviour. A large dashboard usually gets glanced at and ignored, because nobody can act on thirty things at once. The right measures also differ by business, which is why we would rather choose them with you than hand over a standard template.
What if the budget turns out to be wrong?
That is normal and it is not a failure. Something material changes — a contract is lost, a cost jumps, a new opportunity appears — and the budget stops being a useful yardstick. The right response is to reforecast so the comparison stays meaningful, rather than spending the rest of the year measuring against a plan everybody knows is obsolete.

Speak to a chartered accountant

Tell us what you need and we’ll let you know whether we can help, what it involves and what it costs — before you commit to anything.

General information only. This page describes services provided by DKD Accounting and is general in nature. It does not take account of your objectives, financial situation or needs, and it is not tax, legal or financial product advice. Rates, thresholds and caps change — always confirm current figures with the ATO or speak to us about your circumstances.
Source: ATO — Income and deductions for business · ATO — Tax rates and codes