Simple Explanation of Budget Tracking
Tracking budget spend is the process of setting a budget and then recording and monitoring the actual costs or expenses for your orders, projects, and similar items. By tracking related costs, you can see the actual costs and amounts associated with a given item. Thanks to information about the percentage fulfillment of the set budget, you can immediately make decisions. Budget tracking helps you stick to your set budget.
- Budget tracking is the process of setting a desired budget or target.
- You then record the costs or expenses. Recording costs is the process of noting how much something actually cost you.
- Thanks to online information, you can immediately compare actual costs with what you planned to spend and make informed decisions.
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- Budget tracking means you're constantly monitoring how much of your planned budget has already been spent, so you don't go over the set limit.
How Does Budget Tracking Work?
1. Set a Budget
- Before you start tracking costs, determine how much money you can or want to spend on a specific item or project.
- This is your budget (e.g., project budget, budget for maintaining a specific asset, or marketing campaign budget).
2. Enter & Log Expenses
- Systematically log every expense.
- Track these expenses in the "Costs and Consumption" tab (or similar section of your accounting software).
- Categorize costs based on your needs, typically into three basic types: labor, materials, and contracted services.
3. Monitor Actuals vs. Budget
- Once you record an expense, you have a real-time overview of budget performance.
- The difference between your planned spending and actual expenses is called a variance.
