What are the best ways to simplify variance analysis without losing its value?

1 Choose relevant variances

Not all variances are equally important or meaningful for your analysis. Depending on your objectives, you may want to focus on the most significant or influential variances that affect your key performance indicators (KPIs), such as sales, revenue, profit, or customer satisfaction. You can use various criteria to select relevant variances, such as magnitude, frequency, trend, or impact. For example, you can filter out variances that are below a certain threshold, occur rarely, show no consistent pattern, or have minimal consequences.

3 Automate calculations

Manual calculations can be tedious and error-prone, especially when dealing with large and complex data sets. You can save time and reduce mistakes by automating variance analysis calculations using software tools, such as Excel, Power BI, or Tableau. These tools can help you perform various functions, such as data import, data cleansing, data transformation, data analysis, data visualization, and data reporting. You can also use formulas, macros, or scripts to create custom calculations, such as percentage changes, ratios, or indexes.

4 Apply benchmarks

Benchmarks can help you evaluate variance analysis results in a more objective and meaningful way. They can provide you with a reference point or a standard of comparison for your performance. You can use different sources of benchmarks, such as historical data, industry averages, best practices, or competitors. You can also use different types of benchmarks, such as absolute benchmarks, relative benchmarks, or dynamic benchmarks. For example, you can compare your current performance with your past performance, your industry performance, your best performance, or your target performance.

5 Simplify reports

Reports are the final output of variance analysis. They should communicate the main findings and recommendations of your analysis in a clear and concise way. You can simplify your reports by following some guidelines, such as using plain language, avoiding jargon, using short sentences and paragraphs, using headings and subheadings, using bullet points and lists, using tables and charts, and using summaries and conclusions. You can also use templates or formats that suit your purpose and audience, such as memos, slides, or dashboards.

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?