What is a common approach to track performance against a budget plan?

Calculating the variance between projected budget and actual results is a fundamental approach to tracking performance against a budget plan. This method involves comparing what was planned in the budget (the projections) to what was actually achieved (the actual results). By identifying the variances, businesses can determine whether they are over or under budget in specific areas.

This process helps organizations understand the reasons behind significant variances, allowing for proactive management of resources. It provides insights into areas where performance may need to be improved, spending adjustments should be made, or where revenue is exceeding expectations. Furthermore, it assists in refining future budget plans based on historical performance data, leading to better financial forecasting and strategic decision-making.

Other options, while relevant to business processes, do not directly relate to tracking budget performance. For instance, reviewing social media engagement focuses on marketing effectiveness rather than financial metrics. Conducting employee performance reviews measures individual contributions, and assessing customer loyalty programs evaluates customer relations, neither of which provide a clear view of financial performance against a budget.