Performance monitoring and control

• Budget variances (the difference between actual and budgeted figures) are critical for identifying areas of over- or under-performance. By regularly monitoring variances, managers can take corrective actions to keep the business on track.
• • Favourable Variances (e.g., higher sales or lower costs) highlight success, and businesses can capitalize on them by replicating strategies that work.
  • Adverse Variances (e.g., higher costs or lower sales) signal potential problems that need to be addressed promptly.
• Managers use variance analysis to make informed decisions, such as cutting costs, adjusting forecasts, or reallocating resources.
• Investors look at budget variance reports to evaluate how well the company is performing relative to its financial targets, helping them assess investment risks.
• Suppliers and creditors may assess the financial health of the business by examining budget variances, influencing their willingness to offer favorable credit terms.