A few years ago, I was researching information for my master’s degree final project. The title of my dissertation was “Identification of Improvements in Controlling Models for Industrial Companies”. The goal was to develop a procedure able to identify gaps in any controlling model. In the process, I came across interesting information on zero-based budget and closed-loop cost management.
Later, as a plant controller, while I was responsible for improving the budgeting process and the overhead cost control in my plant, I saw a clear opportunity to apply my procedure. One of the tools I implemented was what I called, the “Budget Responsibility Matrix”.
This matrix is a one-page document that compares actual costs vs. budget by department and category. Its objectives are to:
- Provide a quick and clear view of budget deviations.
- Identify non-budgeted items (or budgeted items without actual costs).
- Promote cost ownership by encouraging a cost-conscious culture among plant members.
Below is an example of the matrix. In the columns, we list the departments and names of the managers, while in the rows, we include the cost categories. In addition, the company may assign an owner to every cost category, who is responsible for any deviations in their respective category.
The result is a comprehensive overview of deviations by category, by department, and the combination of both, as well as the total deviation for the entire company.
The following video shows how to build the matrix in Excel step by step and the data required before starting. You can download the file used in the video here.
