Project Budgets and Reporting Systems:
In many cases, where a project is initiated and a budget allocated, a separate account is created to ensure costs attributable to that project are readily identified. If a separate account was not commenced, expenditure would be spread across the general business accounts and an accurate breakdown of costs would be difficult to assess. The separate project account would include sub-accounts for areas of expenditure identified in the project budget.
Along with aligning budget items to accounts, once a budget is agreed and communicated to the staff who will manage them, a reporting system will need to be introduced to ensure budget information is relayed back to management.
Reporting systems of one form or another exist in most businesses, they can be as informal as a weekly meeting, or as formal as daily written reporting. Generally they reflect the personality of the business and the industry in which the business operates.
As a general guide however, for a reporting system to be effective it must:
- Be unambiguous and clearly understood by all involved in the reporting chain
- Provide for the establishment and delegation of clear lines of authority in the chain, such as who is authorised to adjust budgets and by how much
- Detail what information needs to be collected and by whom
- Detail how often this process is to occur
- Detail how results are to be measured and interpreted and in what form are variances recorded
- Detail how results are to be communicated once variances are reported and corrective courses of action taken
- Advise on reporting action to management