How to speed up variance analysis
Image by Mehrshad Rajabi via Unsplash
“My variance analysis takes too long. I don’t have enough time to figure out what’s causing the differences.”
Have you also thought this before, late in the evening, during month-end close?
Here are 3 tips to speed up your analysis:
#1 Prepare
During month-end close, timelines can be tough, so set up your system pulls before the close. Getting your numbers ready shouldn’t take more than 10 minutes. I still see people comparing versions by looking at different windows. That’s a big no-no. You want the two versions you compare to each other on the same sheet.
Prioritize automation. If it takes you two to three hours after the close to create an automation that saves an hour every month during crunch time then you will thank yourself later.
#2 80/20
The 80/20 principle states that it takes 20% of the resources to get 80% of the results. To get the final 20% you have to spend four times as much time as for the first 80%. Variance analysis is one area in FP&A where the 80/20 principle definitely applies. Don’t fall prey to “analysis paralysis”. Focus on the variances that are material. Deprioritize the rest. Look for the story - which variances require action by the business. Start there.
#3 Partner
Variance analysis shouldn’t be just a Finance job. FP&A’s job is to find the issue, the business needs to find the cause and the solution. But don’t surprise your business partners with last-minute requests to explain a variance. Instead, discuss the process upfront to manage expectations. Then stick to it.
If you’d like to learn more about FP&A, I offer help in three ways:
1️⃣ Subscribe to my free newsletter “FP&A Tuesday” here.
2️⃣ Listen to 75 bite-sized mini lessons and get FP&A advice on the go.
3️⃣ Join my live online course FP&A Bootcamp to master FP&A in two weeks.
