Accumulated budget
What is it?
The KPI shows the total amount of budgeted resources or money that has been allocated and planned to cover costs and investments during the specified period of the current year. This key figure provides an overview of how the budget is accumulated or spent over time and is useful for following financial planning and control during the year.
Accumulated means summing up or accumulating budget for different time periods (often months) over a certain period of time; in this case the current year. In other words, it is a cumulative or aggregate statement showing how much money has been allocated so far.
Cumulative budgeting is often used to track and evaluate how well an organization is following its financial plan over time, and it can be helpful in identifying trends and patterns in budget execution. It provides a more comprehensive picture of financial performance than a single monthly or quarterly budget.
How is it calculated?
Budget summed up to specified time period
* Includes budget for the current year.
Why is it important to follow?
Following the key figure is important for several reasons:
Financial Planning: It provides continuous insight into how well the organization is staying within the budget set for the current year. It enables close monitoring of financial performance over time.
Cost control: By following the budget, the organization can keep track of its costs and avoid overruns. It helps maintain financial discipline.
Decision making: The budget serves as an important basis for making decisions about investments, projects and strategies. Having a clear understanding of the overall budget is critical in determining whether proposed actions are financially feasible.
Performance monitoring: The budget serves as a reference point for evaluating the organization's financial performance. It makes it possible to compare actual expenses and income with the planned figures and identify any deviations.
Resource prioritization: Knowing the total budget helps prioritize resource allocation. The organization can focus its resources on the areas that are most critical and strategically important.
In summary, following the key figure is critical to ensuring sound financial management, achieving budget goals and planning for a stable and successful financial future. It provides the organization with a continuous overview of its financial performance over time and enables adequate adjustments when needed.
Created by Homepal
9/15/2023
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