When analyzing your P&L, it's always great to build in a Volume/Rate analysis...and if you're not - you should! But wait, what is volume/rate analysis?
In the simplest terms, for each expense item that is tied to volume it will show you how much of the favorable/unfavorable variances are coming from volume changes vs "rate". If your sales are increasing, you'd expect total COGS to increase as well but you want the contributor to be because of volume changes, not the rate.
There are a variety of ways to do this but as an example, see the image below.
As you can see, in this example, Net Revenue grew by 24%. COGS were unfavorable by roughly 23% but as we layer in our volume/rate analysis we can see the vast majority of the unfavourability comes purely from the increase in volume.
This is a relatively easy implementation.
Go from just reporting your P&L to providing clear, digestible, insights into your P&L to your management team, Board, and investors. Not only will they appreciate it, but it ultimately will also drive more insightful conversations and expectations as you grow your business.
#CPG #Emergingbrands #Insights #Finance #Growth #Margin #CFO #FinancialPlanning #Reporting #FinancialReporting
Executive Information Security/Risk Management Officer, Security Architect SAAS,PAAS,IAAS,Cloud/on-Prem, ISMS(ISO/NIST/FISMA, Lead Auditor, Father(Neural Divergent Advocate)
1moGreat advice