Budgets and Operating Plans
Budgets and Operating Plans are directly linked to Business and Strategic Plans in that they resemble Year 1 of the longer-term financial plans. They will differ in the fact that any current information affecting the business that becomes available from the time the Business/Strategic Plans will be incorporated into the budget and operating plans for the upcoming fiscal period. These plans consider all facets from financial, human and technological resources and requirements.
Forecasts
Forecasts are the quarterly exercise that incorporates the previous quarter’s actual results. In addition to actuals results if there are any changes in the burn rate of expenses, sales, production costs, these factors are projected in the subsequent periods left in the fiscal period covered by the budget/plan.
Variance Analysis
Variance Analysis is the cornerstone of key fiscal management. Variance analysis analyzes every line item in the Income Statement by comparing it to both the budgeted and forecasted levels. If these variances are material given Management’s tolerances (i.e., 5%, 10%, etc.), then this would require Management Action to determine to resolve any underlying issues and determine if the variance is temporal or will have continuing implications. Given this determination, all published financial information should reflect the resolution of all material variances.