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What's the best way to present variance analysis to stakeholders?

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Variance analysis is a key tool for financial management, especially for budgeting and forecasting. It helps you compare your actual performance with your planned or expected results, and identify the causes and effects of any deviations. However, presenting variance analysis to stakeholders can be challenging, as you need to communicate complex and often sensitive information in a clear and concise way. In this article, we will share some tips on how to present variance analysis to stakeholders effectively.

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Anand S, CPA, CA, MBA

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1 Know your audience

Before you prepare your presentation, you need to understand who your stakeholders are, what their interests and expectations are, and how much detail they need. For example, senior executives may only want to see the high-level summary and the key drivers of variance, while project managers may want to see the breakdown by activity and the corrective actions. You should also consider the level of financial literacy and familiarity with variance analysis of your audience, and use appropriate language and terminology.

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Anand S, CPA, CA, MBA

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One has to start from the desired outcome of the variance analysis presentation and work backward. For example, if it is to get project managers to manage projects differently, then it needs to be focused on the top 5 projects and bottom 5 projects.

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2 Choose the right format

The format of your presentation should suit the purpose and context of your variance analysis. For example, if you are presenting monthly or quarterly results, you may use a dashboard or a scorecard that shows the key performance indicators (KPIs) and the variances against the budget or forecast. If you are presenting a specific project or initiative, you may use a table or a chart that shows the actual, budgeted, and forecasted values, and the variance percentages and amounts. You should also use visual aids, such as colors, icons, or graphs, to highlight the significant or critical variances.

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3 Explain the causes and impacts

The main goal of variance analysis is to understand why the actual results differ from the planned or expected ones, and what are the implications for the future. Therefore, you should not only present the numbers, but also explain the reasons and factors behind them. For example, you can use a variance analysis matrix that shows the four types of variance: favorable or unfavorable, and controllable or uncontrollable. You should also quantify and qualify the impacts of the variance on the overall performance, such as profitability, cash flow, or customer satisfaction.

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Anand S, CPA, CA, MBA

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It also makes sense to breakup the analysis to a lower level, for example, price, volume and mix, to better understand the drivers of the variance.

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4 Provide recommendations and actions

The final step of presenting variance analysis to stakeholders is to provide recommendations and actions to address the variance and improve the performance. You should align your suggestions with the strategic objectives and priorities of your organization, and consider the feasibility and risks of each option. You should also assign responsibilities and timelines for the implementation and monitoring of the actions, and indicate how you will measure and report the outcomes. You should also invite feedback and input from your stakeholders, and encourage collaboration and communication.

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5 Anticipate questions and objections

One of the challenges of presenting variance analysis to stakeholders is to deal with questions and objections that may arise during or after your presentation. You should anticipate the possible queries and concerns that your stakeholders may have, and prepare clear and accurate answers and evidence. For example, you may be asked to explain how you calculated the variance, how you verified the data, how you prioritized the actions, or how you mitigated the risks. You should also be prepared to handle any emotional or defensive reactions, and maintain a positive and professional tone.

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6 Follow up and follow through

The last tip on how to present variance analysis to stakeholders is to follow up and follow through on your presentation. You should send a summary and a thank-you note to your stakeholders, and attach any relevant documents or materials that support your analysis and recommendations. You should also keep track of the progress and results of the actions, and update your stakeholders regularly on the status and achievements. You should also review and revise your budget or forecast based on the variance analysis, and incorporate any feedback or learning from your stakeholders.

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7 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?

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What's the best way to present variance analysis to stakeholders?

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1 Know your audience

2 Choose the right format

3 Explain the causes and impacts

4 Provide recommendations and actions

5 Anticipate questions and objections

6 Follow up and follow through

7 Here’s what else to consider

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