Business/Economic Reasons for the Variance Between Budgeted and Actual Revenues, Essay Example

1. Identification of new uses- if the fresh uses or applications of the product being dealt with are identified, this will simply bring about an increase in demand for the same since the existing consumers will consume it more and the new ones with a new preference will put it into fresh use. The increased demand will augment the sales and consequently yield an increase in revenues than anticipated.
2. Invention or identification of new markets  that were not put into consideration while budgeting- new markets will imply a fresh demand that was not anticipated, and as the business struggles to meet this demand, a considerable increase in sales will be experienced ceteris peribus.
3. Government incentives- some of government incentives such as improvement of distribution network and campaigns encouraging the public to consume the product under consideration, can augment revenues than anticipated in the budget owing to the enhanced efficiency and acceptance of the product; this will boost its demand.
4. Mismanagement of the sales budget- this might include embezzlement of funds, misallocation of marketing funds to ineffective advertising, diverting cash that had been set aside to boost sales to other uses etc. this will strain sales budget, increase sales expenses and eventually decrease the revenues than anticipated in the budget.
5. If a competitor quits from a shared market- this will imply that the market share that belonged to her can be easily converted and be served by the current business firm. If this is done, demand for our products will as well as revenues will increase.

Business/Economic Reasons for the Variance Between Budgeted and Actual Expenses

1. Increased tax on revenues i.e. Value Added tax (VAT) and corporate tax (Tax on company profits) – these are mandatory expenses and they directly raise the actual expenses than budgeted.
2. Invention of new technology that is more efficient than the one that existed during the budgeting period- the resulting efficiency say in production or in distribution, will imply that less expenses will be incurred and hence a reduction in expenses than anticipated.
3. If the company loses some of its key employees to its competitors especially in the sales department to its competitors, this will necessitate unanticipated recruitment expenses to replace these employees. In addition, the hired employees might not be as productive as as the former and might incur expenses before catching up with the marketing network. This will augment the actual expenses to surpass the budgeted.

Reference

Naftari, A. K. (2006). Budgeting: Starting From Scratch. 2^nd Ed. Nairobi: Longhorn Publishing Ltd.