The Most Frequent Mistakes in Budget Calculations and Their Consequences

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Many mistakes in calculations reveal themselves after some time. But there are some that no one ever finds but they still affect the work of the company. The reason for 90% of such errors is the human factor. Unfortunately, it is unlikely that mankind will ever be able to get rid of it completely because it is part of human nature. But forewarned is forearmed. If you learn about the frequent mistakes that lead to inattention, you can effectively resist them. Whether it's working with loan companies like Payday Depot or calculating your grocery expenses, you should remain attentive.

Typos in the Data

There are many variants of such mistakes. Letters and numbers that stand close to each other, homonyms, a quick train of thought that you were trying to keep up with - all these can lead to typos in your documents. At first glance, such minor changes are harmless, but therein lies their danger. This is especially true when it comes to financial calculations. One wrong figure can confuse your entire records and wreak havoc with your data. 

How do you avoid such malfunctions? Double-check the document you've written, and before you do, let it lie. Get back to it after a while and double-check each line with a fresh eye. It would be nice if someone else looked at it the same way.

Lack of Knowledge of Rules and Formulas

Often you can see the phenomenon where, due to lack of knowledge or to simplify the work to calculate the budget for the current year, they take the last year's data. However, this is not the right approach, because there are different formulas and calculation rules for each item of expenditure. The error in the calculations will be insignificant if you decide to take a shortcut with last year's budget. However, that small amount will show up every year and over time will add up to a huge loss. In addition, a detailed report and plan will allow you to understand how the business process works, which is very important in future planning. This will not only eliminate the error in calculations but also show the main places of budget movement, which later can be optimized and save even more finances.

Reports for Your Peace of Mind

There are usually no common mistakes in such documents. All calculations are correct and double-checked several times. The trap, however, lies in the attitude toward making this report. Often in such reports, you will see a deliberate distortion of the raw data. This is done to guarantee the result and improve the overall impression of it. For example, by underestimating the planned input data, you get a nice over-fulfillment of the plan. And by overestimating the original planned costs can be "saved." Such errors are difficult to recognize in the aftermath, and they occur because of a distortion of the purpose of reports and plans. Perhaps they have become a means of competition within the company, or maybe the company itself wants to intimidate competitors. But the price of such an approach may be too high.