3 Budgeting Mistakes And What They Lead To

Some errors in the calculation of the budget do not even have time to manifest themselves. Others are not found at all, but because of them, the company may abandon a profitable project or unfairly accuse an employee of overspending. For most calculation errors, there is a tolerant reason – the human factor.

He is annoying because there are often no specifics behind him. If you are in need of financial assistance, you can always go to Payday Depot and have your problems resolved. We talk about three “human” calculation errors, what they lead to and whether something can be done about them.

Typos in numbers and formulas

There are several options for such errors:

  • added thousands to millions, kilograms to money, etc. (sums of a different order or different units of measurement);
  • accidentally confused: 393, not 193 (digits when typing numbers), not 393, but 3.93 (digit capacity of sums) or “double minus” (signs in formulas);
  • skipped or double-calculated some budget items in the total, and incorrectly entered the initial data line by line (for example, sales volume and average check).

What to do?

  • The initial data for the budget should be indicated separately – it is better on a special sheet. Do not sew them inside formulas with numbers, but use cell references. So it’s easier to check.
  • Compare the analytical indicators of the budget with the last year, with the overall dynamics. In our example, the average check or a decrease in sales (if there was one) should alert.
  • Introduce a rule to be sure to check yourself before sending the calculation to the work of the next executor.
  • Test new forms of calculation on prime numbers or data from past years.
  • Cross-check yourself through formulas with different ways of calculating (for example, self-calculation by year or summing up monthly values).

Ignorance of the rules and formulas for calculating the indicator

This error can be caused by:

  • ignorance of the basic formulas for calculating a certain budget item;
  • misunderstanding of the limitations of a particular method (economic or arithmetic rounding of values, forecasting methods);
  • vagueness of the content of the subject of settlements.

Often, no calculations are made for the budget, but they simply take data from the last year. But for each article, there is a specific formula, its own calculation rules, the sequence of actions during the formation, and an understanding of how the business process proceeds. What to do?

  • The most effective way is to analyze the fact in detail in case of any deviations from the plan. If necessary, communicate with relevant specialists.
  • Make a detailed calculation for all items and evaluate whether it can be replaced by assumptions or calculations on the average, deflator, etc. (that is, for simplicity, consider it differently, but without loss of quality).
  • Try to apply flexible planning technology for your budget items (put down at least part of the formulas for items that directly depend on sales and production volumes, and then analyze deviations in detail).
Andrew Wise

Published by
Andrew Wise

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