Your cloud bill shows you're "at risk" of exceeding your budget. But what does that actually mean? Are you over budget? Are you on track? Should you worry?
Most cost monitoring tools use "at risk" without explaining it. Here's what it actually means, and why it matters.
Over Budget vs. At Risk
Over budget means you've already exceeded your limit. If your monthly budget is $10,000 and you've spent $10,500, you're over budget. This is clear, but it's also too late. The spending already happened.
At risk means you're on pace to exceed your budget. If you've spent $5,000 halfway through the month, you're on pace to spend $10,000 total. If your budget is $8,000, you're at risk.
This is more useful because it's early warning. You're not over budget yet, but you will be if nothing changes.
Understanding Pace
Pace is how fast you're spending. If you spend $1,000 in the first 10 days of the month, your pace is $100 per day. Over 30 days, that's $3,000 total.
Pace changes daily. If you spend $500 on day 1, your pace is high. If you spend $50 on day 2, your pace drops. Most tools calculate pace as average daily spend so far this month.
Pace tells you where you're heading. If your pace is $400/day and your budget is $10,000, you'll spend $12,000 this month. You're at risk.
The Forecast
A forecast predicts total monthly spend based on current pace. If you've spent $4,000 in 10 days, your pace is $400/day. Over 30 days, that's $12,000.
Forecasts update daily. As the month progresses, forecasts get more accurate. On day 1, a forecast is a guess. On day 25, it's nearly certain.
A good forecast also accounts for trends. If your pace is increasing (spending more each day), the forecast should reflect that. If your pace is decreasing, the forecast should account for that too.
Days to Risk
Days to risk is how long until you exceed your budget at current pace. If you're spending $400/day and have $2,000 left in your budget, you have 5 days until you're over budget.
This is useful because it's concrete. "You're at risk" is vague. "You have 5 days until you exceed budget" is specific.
Days to risk changes daily. If you slow spending, days to risk increases. If you accelerate spending, days to risk decreases.
Thresholds Matter
Most tools let you set thresholds for "at risk" alerts. Common thresholds:
- 80% of budget: Early warning
- 100% of budget: Over budget
- 120% of budget: Severely over budget
These thresholds help you prioritize. If you're at 75% of budget, you're not at risk yet, but you're getting close. If you're at 95%, you're definitely at risk.
The right threshold depends on your tolerance for risk and your ability to control spending. If you can reduce spending quickly, you can set a higher threshold (e.g., 90%). If spending is hard to control, set a lower threshold (e.g., 70%).
Why This Matters
Understanding "at risk" helps you:
- Catch problems early: Before you're over budget
- Prioritize attention: Focus on the highest-risk items
- Make informed decisions: Know how much time you have to act
Without this understanding, "at risk" is just noise. You ignore it until you're over budget, then it's too late.
The Bottom Line
"At risk" means you're on pace to exceed your budget. It's early warning, not a problem yet. Use pace, forecasts, and days to risk to understand how urgent the situation is, then act accordingly.
Most teams ignore "at risk" alerts because they don't understand them. Don't make that mistake. Understand what "at risk" means, set appropriate thresholds, and act when alerts fire.