Factors businesses need to consider when deciding how to act on variances
Beware of chopping and changing the budget too much
Changing the budget removes certainty-which removes one of the big benefits of budgets
Altering budgets can also make them less motivating-when staff start to expect that management will change targets instead of doing something to change performance, they don't see the point in trying any more
Decisions based on Adverse Variances

1. Change the marketing mix
2. Streamlining production
3. Motivate employees to work harder
4. Ask suppliers for a better deal
5. Do additional market research to improve forecasts in the future
Decisions based on Favourable Variances

1. Set more ambitious targets next time
2. Try to get everyone else doing whatever was responsible for the improvement, and set higher targets in the next budget
3. Increase production and take on additional staff to meet increased demand
