Budget variances could create disharmony in the management of operations within the sales division of the insurance company, thereby highlighting the need to manage such inconsistencies. Four strategies can be adopted to mitigate this issue. The first one involves disclosing these variances to the company’s management and board of directors to increase accountability and create synergy in the management of organizational activities. This strategy would also help to identify the main sources of the variances within the sales division and identify the right actions that should be taken to minimize them.
Secondly, current budget variances should be managed by cutting expenses in key areas that are not impactful to the overall sales goals of the organization. For example, some sales functions may be automated, thereby minimizing the risk of human errors occurring when undertaking sales activities. Thirdly, the organization can decide to avoid new expenditures to manage budget variances because they can significantly destabilize its operations. Additionally, financing new expenditures could lead to resource diversification from already pre-planned activities, thereby causing gaps when developing budgetary plans.
Fourth, reallocating assets and workers could significantly reduce budgetary variances by enabling managers to identify financing gaps and reroute resources to fill them. This action does not necessarily have to be financial because labor reallocation programs could also help to address resource gaps. Therefore, this action will ensure that all sales divisions are effectively financed without bias and that they have the right workforce. Additionally, there needs to be a standardized budget planning process to improve the consistency of resource allocation across various sales divisions. These proposals are aimed at minimizing budget inconsistencies across the department and encourage the development of a centralized budget planning process that would ensure that each function is appropriately financed, thereby minimizing inconsistencies that may emerge when budget planners are unable to address the needs of each division.
The centralized budget planning process would also create a consistent variance management plan that would ensure variations are addressed in a standard manner across all sales divisions. This proposal would eliminate inconsistencies in the way budget variances are addressed in the company. The proposal is consistent with the views of Coveney and Cokins, who argue that the budget planning process needs to be standardized across various divisions and departments in an organization. Overall, the proposed changes are meant to achieve three main goals: ensure the budget proposals made to each department are consistent, address variances that are above or below budget, and make sure that they are in a standard format across all sales divisions.