Actual vs Budget Report
What is it?
The Actual vs. Budget report is probably the most useful financial report for leadership to review on a consistent basis. On this report you will find the same information as reported on the Statement of Financial Activity but you will compare the actual income and expenses for the month for each account to the budgeted income and expenses for the same time period.
Why is it important?
As we discussed in the blog, Budgeting: Where to Start, the operating budget is critical and serves as a spending guide for the church. Budgets ensure that you keep the train on the track so to speak and provide an understanding and expectation of your congregation as to how their donations will be used. This builds trust.
The leadership will want to review actual to budgeted expenses at a minimum on a quarterly basis. A column indicating percentage of budget used or remaining is often helpful as well.
How to Use this Report
I think of the budget as a living document in a sense as there may be extenuating circumstances that require the leadership team to adjust the total budget up or down and/or move funds in the budget from one line item to another as the year progresses and actual expenses are reported.
If you add a column for % of budget used, you can make a quick analysis of the report. Think about it, dividing the year into 12 months means approximately 8% of each line item should be reported each month. So in January any line items varying greatly from 8% or in April, for example, any line items varying greatly from 32% (4 x 8%) may need to be investigated or at least explained.
Stay tuned for next week.