1st Quarter is Coming to a Close, Now What?

Mar 31, 2014

If you live in or around the Ohio area, like I do, you are probably thankful that 1st quarter is ending and maybe that means the snow and cold weather will finally be gone! It is supposed to be 62 and sunny today, but in a few days back to the 40s and 50s! Oh well, you can’t have everything and at least with April on the way we can get out of these winter blues! And truthfully I’ll take the 40s and 50s over what we had! Perhaps more importantly, with the close of first quarter I am also hopeful that everyone is comparing their budget to actual.

written-budgetFirst of all, I hope a budget was established in late fall of 2013 for the 2014 year. If you did not, consider creating a budget for the remainder of the year now. As I am sure many of you have heard me say, if you do not know what something should be, it’s easy to believe it is correct. It’s like taking an exam that you didn’t study for: all the answers may seem to be the right answers.

If you did a budget, I hope you have been taking the time to compare your estimates to what actually did happen? A budget is only useful tool if it’s used! Not spending the time to reconcile it to actual completely negates the time spent creating it.

The best use of a budget is comparing the actual results to the anticipated results and then answering the question why. Why were things better/worse/different than expected. Is the cost of material higher, but scrap lower. Or, is cost of material lower and scrap higher, for example. Just looking if the numbers are more or less than what you expected and not asking why, again is not a good use of time.

Looking at the budget at the end of the quarter is a necessity, but even more frequently could be very useful. Reconciling every month is a good practice and sometimes every week, every day, every hour is necessary. You need to know what you are looking for and the correct time frame to look at it. Comparing the monthly utility charges every hour would not make sense, but reconciling material usage every hour may.

Categories: Cost Accounting