Why Is a Quarterly Budget Report Important?

Information contained in the quarterly budget report can guide management toward increased profitability. Loan officers and potential investors interpret the data to compare your company's performance with its own historical trend as well as against similar-sized businesses in the same industry. The quarterly budget report provides a snapshot of your company's financial health.

A quarterly budget report informs you whether the company has enough working capital to meet its needs. Working capital is the amount of cash your business has available to pay all expenses for the following 90 days. Your company's credit standing with its suppliers depends on timely payment, so you should immediately address any shortage in working capital.

Review actual expenditures to the amount allocated to each category. Discrepancies can alert you to project scope creep, unusual spending or possible employee theft. Sometimes the accountant writes a footnote to explain any unusual variance from the allocation. Other times you need to follow the audit trail to identify errors, such as an expense charged to the wrong account.

Examining the revenue for each of your products alerts you to changing trends. For example, if Product A revenues have dropped significantly during the quarter, you can research whether the cost of manufacturing Product A has increased or if sales have decreased. This information helps you decide whether to find a cheaper supplier, raise the price of Product A, discontinue Product A or keep it as a seasonal item. Revenues must be watched closely as they have a direct effect on profits.

By reviewing previous quarterly reports, management can predict future needs for inventory, personnel, advertising and other costs. Many industries have busy or slow periods, but some companies might buck those trends. The quarterly budget report enables management to make decisions that might improve the company's profitability.

The most recent quarterly budget report reflects the current financial health of a business. Loan officers compare current and past quarterly reports to ensure that your company has the ability to repay its debts. Investors examine the quarterly reports to determine if the business is likely to continue earning a profit. Loan officers and potential investors use this report to investigate whether profits or losses from any one quarter were unusual.