What are the benefits of variance analysis in Corporate FP&A?

1 Enhancing accountability

Variance analysis allows you to hold your deal team members accountable for their performance and contribution to the overall deal value. By tracking and reporting the variances between actual and planned revenues, costs, margins, cash flows, and other key metrics, you can evaluate how well each deal team member delivered on their targets, responsibilities, and assumptions. You can also use variance analysis to reward high performers, provide feedback, and address any issues or gaps.

2 Improving decision making

Variance analysis helps you make better and faster decisions based on data and insights. By analyzing the variances between actual and planned results, you can identify the factors that influenced your deal performance, such as market conditions, customer behavior, operational efficiency, competitive actions, and internal processes. You can also use variance analysis to test the validity and reliability of your forecasts, assumptions, and models, and adjust them accordingly. This way, you can improve your accuracy, confidence, and agility in decision making.

3 Optimizing resource allocation

Variance analysis enables you to optimize your resource allocation and prioritize your actions. By measuring and comparing the variances between actual and planned results, you can determine which deals, segments, products, or regions are performing well or poorly, and allocate your resources accordingly. You can also use variance analysis to identify and address any bottlenecks, inefficiencies, or risks that may affect your deal performance, and allocate your resources to mitigate them. This way, you can maximize your return on investment, reduce your costs, and increase your profitability.

4 Communicating effectively

Variance analysis helps you communicate effectively with your stakeholders, such as senior management, investors, lenders, customers, and regulators. By presenting and explaining the variances between actual and planned results, you can demonstrate your deal performance, achievements, and challenges, and provide transparency and accountability. You can also use variance analysis to highlight the opportunities and threats that may impact your deal performance, and propose recommendations and actions. This way, you can build trust, credibility, and rapport with your stakeholders, and align them with your goals and strategies.

5 Learning and improving

Variance analysis allows you to learn and improve from your experience and feedback. By reviewing and analyzing the variances between actual and planned results, you can identify the best practices, lessons learned, and areas of improvement for your deal execution. You can also use variance analysis to benchmark your performance against your peers, competitors, or industry standards, and identify the gaps and strengths. This way, you can enhance your skills, knowledge, and capabilities, and drive continuous improvement and innovation for your deal performance.

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?