登录查看更多内容

What are the best practices for analyzing variances in P&L management?

由人工智能和领英社区提供技术支持

P&L management is a crucial skill for corporate finance professionals who want to advance their career paths. It involves monitoring and controlling the revenues and expenses of a business unit, and analyzing the causes and impacts of any deviations from the expected results. In this article, you will learn some of the best practices for analyzing variances in P&L management, and how to use them to improve your performance and decision-making.

此文章中的业界达人

由社区从 8 条内容中精选。了解更多

Hanan Hasbullah

Senior Accountant @ Coreo Real Estate | Head of Finance
Mohamed Moustafa Saber, MBA

Potential Candidate for CFA Level 1 Exam Nov 2024 | Sr. FP&A @Midar | MBA in Finance & Investment | +14 Years in…
Pawan Mundada

Executive Costing Officer at Ipca Laboratories Limited

1 Define your budget and KPIs

The first step in analyzing variances is to have a clear and realistic budget and key performance indicators (KPIs) for your business unit. A budget is a plan that outlines the expected revenues and expenses for a given period, based on your goals and assumptions. KPIs are measurable indicators that track your progress and performance against your objectives. You should align your budget and KPIs with the strategic direction and priorities of your organization, and communicate them clearly to your team and stakeholders.

添加您的观点

Mohamed Moustafa Saber, MBA

Potential Candidate for CFA Level 1 Exam Nov 2024 | Sr. FP&A @Midar | MBA in Finance & Investment | +14 Years in Financial Accounting & Reporting | CFA Level 1 @AUC | Oracle Fusion Key User
举报内容
1- Regularly Review: Conduct monthly for timely insights. 2- Categorize Variances: Operational vs. non-operational for clarity. 3- Deep Dive: Investigate significant discrepancies. 4- Collaborate: Include stakeholders to understand drivers. 5- Benchmark: Use historical and industry data. 6- Forecast Revisions: Update predictions with variance learnings. 7- Communicate: Share clear, actionable insights with teams.

已翻译

赞
Pawan Mundada

Executive Costing Officer at Ipca Laboratories Limited
举报内容
We have to understand all this underlying factors - like sales projections, cost assumptions, or pricing strategies, that we have used to set the expected financial targets.

已翻译

赞
Hanan Hasbullah

Senior Accountant @ Coreo Real Estate | Head of Finance
举报内容
Budgets and KPIs are the compass and milestones in our financial journey. They help us plan for the future and measure our progress, like setting a budget for the year with KPIs such as Gross Profit Margin to steer our profitability goals.

已翻译

赞
Alex Medina

Senior Lead Power & Industrial Canada, providing creative solutions that are fit for purpose // Director no-profit organization, blessed to be active in this sector.
举报内容
P&L, budgets, KPI’s…. We need to look beyond the numbers and the targets, and take a bilateral look to include corporate culture. Understanding and managing numbers as well as understanding and managing people.

已翻译

赞
Nuno Mendes

Finance manager | Supply chain & manufacturing operations finance | FP&A - Financial planning & analysis
举报内容
The analysis of a P&L variance is the exercise where the differences between actual and planned line items of the income statement are explained and interpreted. From my experience the most valuable analysis are those where you identify and agree with the relevant managers the main drivers which support the economic item in analysis, be it a revenue or a cost. Once those are drivers established and clear to all involved stakeholders, it is crucial to setup the methodology and data sources needed to compute the P&L variance and the impact of each of the established drivers. Once that framework is established, with the required buy-in from relevant managers, the communication of results, either visual or numeric, should be smooth.

已翻译

赞

2 Track and report your actuals

The next step is to track and report your actual revenues and expenses on a regular basis, such as monthly, quarterly, or annually. You should use a consistent and accurate accounting system that captures all the relevant transactions and data for your business unit. You should also prepare a standard and comprehensive report that compares your actuals to your budget and KPIs, and highlights any significant variances. A variance is the difference between the actual and the budgeted or expected amount of a revenue or expense item.

添加您的观点

Alex Medina

Senior Lead Power & Industrial Canada, providing creative solutions that are fit for purpose // Director no-profit organization, blessed to be active in this sector.
举报内容
Reporting out is is only as good as the data taken in. A define set of parameters should be established to allow for relevant information to support the outcome of a report. Without a defined set of parameters the variance will be inaccurate.

已翻译

赞

3 Analyze the causes and impacts of variances

The third step is to analyze the causes and impacts of the variances that you identified in your report. You should categorize the variances as favorable or unfavorable, depending on whether they increase or decrease your profit. You should also distinguish between fixed and variable costs, and between controllable and uncontrollable factors. For example, a favorable variance in sales revenue may be due to higher demand, better pricing, or more effective marketing, while an unfavorable variance in rent expense may be due to inflation, contract changes, or external events. You should quantify the impact of each variance on your profit margin, cash flow, and return on investment.

添加您的观点

Hanan Hasbullah

Senior Accountant @ Coreo Real Estate | Head of Finance
举报内容
Analyzing variances in our financial data is like deciphering the financial story of our organization. It unveils the causes behind deviations from our plans and helps us gauge their impact on our bottom line. By delving into these variances, we gain the insights needed to make informed decisions, seize opportunities, and ensure the financial health of our business.

已翻译

赞

4 Explain and justify your variances

The fourth step is to explain and justify your variances to your management and stakeholders. You should provide a clear and concise summary of the main drivers and reasons behind the variances, and how they relate to your budget and KPIs. You should also provide evidence and data to support your explanations, such as market research, customer feedback, or industry benchmarks. You should avoid blaming external factors or making excuses for unfavorable variances, and instead focus on the actions and decisions that you took or could take to manage them.

添加您的观点

5 Take corrective and preventive actions

The final step is to take corrective and preventive actions based on your variance analysis. You should identify and implement the best solutions to address the unfavorable variances, and to sustain or improve the favorable ones. You should also review and update your budget and KPIs as needed, to reflect the changes in your business environment and expectations. You should monitor the results and outcomes of your actions, and measure their effectiveness and efficiency. You should also document and share your learnings and best practices with your team and organization.

添加您的观点

Hanan Hasbullah

Senior Accountant @ Coreo Real Estate | Head of Finance
举报内容
Corrective actions fix what's broken, and preventive actions keep our financial ship sailing smoothly. Together, they're the compass guiding us towards a prosperous and secure financial future.

已翻译

赞

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

添加您的观点

Corporate Finance

+ 关注

给文章评分

我们借助人工智能创建了此文章。您认为这篇文章怎么样？

很棒不太好

举报此文章

查看全部

What are the best practices for analyzing variances in P&L management?

1

2

3

4

5

6

1 Define your budget and KPIs

2 Track and report your actuals

3 Analyze the causes and impacts of variances

4 Explain and justify your variances

5 Take corrective and preventive actions

6 Here’s what else to consider

Corporate Finance

给文章评分

感谢您的反馈

更多Corporate Finance相关文章

更多相关阅读内容