Conducting a budget variance analysis involves the following steps:
Collect Data: Gather actual financial data and compare it with the budgeted figures. Calculate Variances: Determine the difference between actual and budgeted figures. This can be done for each line item in the budget. Analyze Variances: Identify whether the variances are favorable or unfavorable and understand the reasons behind them. Take Action: Based on the analysis, take corrective actions to address any unfavorable variances. Review and Adjust: Periodically review the budget and make necessary adjustments to improve accuracy.