Using budgets

A financial plan for the future conmcerning the revenues and costs of a business.

A variance arises when there is a difference between actual and busget figures.

Favourable Variance

Is when the actual figure is better than budgeted figure.

-E.g costs lower than expected 

Adverse Variance 

Is when the actual figure is worse than the budgetted figure 

-E.g costs higher than expected

• can lead to inflexibility of decision-making 
• Are only as good as the data being used 
• need to be changed as circumstances change
• takes time to complete and manage
• Can result in short term decisions to keep within the budget