What does "budget reconciliation" entail?

Budget reconciliation refers to the process of comparing budgeted figures against actual results. This process is essential for organizations to assess their financial performance and identify any discrepancies or variances between what was planned in the budget and what has actually been spent or earned. By performing budget reconciliation, organizations can better understand their financial standing, enable more accurate forecasting, and make informed decisions regarding future budgeting and spending.

This process often involves analyzing financial statements, accounting records, and variance reports to pinpoint areas where budgeted amounts diverged from actual figures. Understanding these variances allows management to address any over-expenditures, underfunding of programs, or unexpected income, ensuring that the organization remains financially healthy and that its budget effectively reflects operational realities.

In contrast, drafting new budget proposals typically comes into play during the preparation of a budget cycle, eliminating unnecessary expenses is a cost-control strategy within budgeting, and creating a one-time budget does not reflect the ongoing process of financial management that reconciliation entails.