Budget responsibility matrix

Some years ago, I was searching information for my master’s degree final project. The title of my dissertation was “Identification of improvements in controlling models for industrial companies”, so I needed to find some inspiration to develop a procedure able to identify gaps in any controlling model. Then I found an interesting document about zero-based budget and closed-loop cost management.

Later on, working as a plant controller, I had the responsibility to improve the budget process and the overhead cost control in my plant, and I clearly saw an opportunity to apply this method. One of the tools I implemented was, what I called, the “budget responsibility matrix”.

It is a one page document which shows actual costs vs. budget by department and category. The objective of the matrix is:

• To provide a quick and clear picture of the budget deviations.
• To identify non-budgeted items (or budgeted items without actual costs).
• Cost ownership: encourage a cost-conscious culture on the plant’s members.

Below you can see an example of the matrix. In the columns we should put the departments and managers name, and in the rows the cost categories. In addition, the company can assign an owner to every cost category, who is the responsible for the deviations in his/her category.

As a result, we get in just one place the deviations by category, by department, and by the combination of both, as well as the total deviation for the whole company.

The following video shows how to build the matrix in excel step by step as well as the required data we need to have before starting. You can download the excel file used in the video here.