Budget variance reports are a common element in the finance team’s analysis of how the company is doing. Simply put, your variance reports simply show you the difference between what you thought would happen and what did happen.
These reports are far more than an illustration of where the company zigged instead of zagged. They are an important guide to how the company is performing. They also point to how the business is meeting the requirements or projections important to the goals established at the start of the year.
As you look ahead to mid-year re-forecasting, the variance report is a treasure trove of information on where to stay the course and where to pivot. But, if your finance team is occupied updating this report, they’ll have little time to spend analyzing the secrets behind the numbers.
Insights in the Variance Report
Variance reporting is about much more than the difference between your budgeted amount for a given area of the business and the actual results. Looking closely at the results, especially during the mid-year reforecasting, can direct course corrections to keep your company on the path to its goals.
For instance, noting a negative variance from your budgeted amount – such as a greater spend in a department than expected, or fewer sales than projected – can point to several things. Was there a greater spend because a new opportunity arose to meet a client’s need? Was extra funding needed for a deal to purchase a competitor? Were there fewer sales because there weren’t enough people on the sales team or because of an unexpected drop in sales volume?
A positive variance can also be an indicator of both good and bad. For instance, if you spent less to manufacture a new product, was it because the actual cost of the materials was less than expected? Or because a problem in production caused too few units to be produced?
The analysis of your variance reports is as important as the creation of the report itself. Whether or not a deviation is a favorable variance or not is dependent on a number of factors, including what the expected result of the budgeted spend was.
The office of finance needs the time to dig in and do a variance analysis to ensure the company is getting the most insight out of the report. But to do that, the finance team cannot be mired in the creation of the variance report itself. Instead, they need to leverage the right accounting tools to automate the process, which will free them up to spend time strategizing.
Automating Variance Reports Speeds Analysis
Automation of financial statements and reports offers many advantages to the finance team and the company as a whole, not the least of which is increased accuracy and decreased time spent on the creation and review of the reports. When data flows directly from a source system into the financial statements and reports, like the variance report, can be created without intervention, the finance team can dedicate the time into analysis.
More time spent on analysis, of course, means deeper and more meaningful insights. But by relieving the finance team from the task of manually updating the variance reports, among others, those insights can be gained even faster. Speed is an essential element in today’s business world. The sooner you understand the need to make a change, the more agile and adaptive your company can be.
The variance report is far more than a simple financial statement. Come mid-year reforecasting, it’s a critical tool in understanding how close your company is to the path laid out during the annual budget process. These nuggets of information can only come from an analysis of the report, and a thorough analysis only comes from a timely and accurate report. Automating the creation and updating of the variance data gives time back to the office of finance so that the important work of variance analysis can be done well.
Centage Corporation’s Planning Maestro is a cloud-native planning & analytics platform that delivers year-round financial intelligence. With Planning Maestro, Centage offers the sophisticated features needed by small and mid-market organizations to integrate budgeting, forecasting, and deep data analysis within one easy-to-use, scalable SaaS solution. For more information on how to modernize your office of finance with intelligent planning, view our product demonstration video, or call 800-366-5111.