Budget vs Actual: Under Budget. Still Not Good News.
Your team budgeted $100,000 for the month. The report shows $80,000 in expenses. That’s $20,000 under budget, and the spreadsheet has helpfully turned it green.
Before anyone calls it a saving, check what happened to the work.
Budget vs actual analysis compares planned figures with recorded results for the same period and scope. For expenses, a lower actual amount can reflect a real saving, delayed work, or costs missing from the report. The subtraction starts the conversation.
Where did the $20,000 go?
Consider this fictional monthly expense report. All amounts are in US dollars. The actuals are preliminary, before the month-end review.
| Expense | Budget | Recorded actual | Under budget |
|---|---|---|---|
| Routine services | $60,000 | $58,000 | $2,000 |
| Customer research project | $25,000 | $15,000 | $10,000 |
| External support | $15,000 | $7,000 | $8,000 |
| Total | $100,000 | $80,000 | $20,000 |
The $2,000 is a confirmed saving. The supplier delivered the agreed services at a lower price. Nothing was dropped or pushed into next month.
The $10,000 belongs to delayed work. Part of the research project hasn’t started. The owner confirms it will happen next month at the original cost. Keep that expense in the forecast, with its revised timing. This month’s underspend comes with next month’s appointment.
The $8,000 is missing from the preliminary actuals. External support was delivered this month, but the invoice hasn’t arrived and no accrual was recorded.
Under accrual accounting, expenses belong in the period they relate to, even when payment comes later. Finance should review the missing expense and record the appropriate adjustment. ACCA explains this principle in its guidance on accruals and prepayments. ACCA Global
After the confirmed $8,000 adjustment, actual expenses become $88,000. The remaining $12,000 underspend consists of $10,000 in delayed work and $2,000 in savings.
Calling the original $20,000 a saving would give the next meeting some unnecessary suspense.
Make the Excel calculation easy to interpret
With budget in B2 and actual in C2, use =B2-C2 for the expense underspend. Use =(B2-C2)/B2 for the percentage, provided the budget isn’t zero.
For this example, the preliminary underspend is 20%. After the adjustment, it is 12%. Label the column “Under / (over) budget” so readers know what a positive number means. Revenue needs a different interpretation: coming in below budget is generally a shortfall.
Before sharing the report, check that budget and actuals cover the same month, departments, currency, and accounting basis. Then add a brief explanation beside each material difference: what changed, who confirmed it, and whether the cost is still expected.
When the delayed work enters next month’s forecast, check that it isn’t already included there.
Jolene.pro can help you examine budget and actual figures across relevant sheets, with source references behind the answers. Use those references to investigate differences, then confirm missing expenses and project timing with the people responsible
The green cell can stay. Give it an explanation 🦙