Variance analysis is an important process for any FP&A team, but it’s also one that repeatedly drags down their efficiency. Flip-flopping between different spreadsheets, departmental records and time periods, all during the shrinking window of period end, quickly leaves employees scrambling to finish. All too often, the depth of the variance analysis suffers as the team works to complete their tasks within the prescribed timeframe. However, thanks to advancements in automation specifically designed for the office of finance, there is a timelier way to approach this process.
Manually executing the variance analysis process leads to significant time delays between when the job can be completed, and its information is provided to management for their review. With such little time available at period-end, there is no guarantee that everyone involved will be able to confidently verify the information or that the information will be actionable before the following month’s reconciliation. Automated variance analysis heightens the usefulness of the variance analysis process and its potential insights into your business.
With automation, the removal of manual tasks allows for you to complete the process earlier and identify issues without the need to stay late night after night. And, running a truly comprehensive analysis, not one that is rushed, potentially full of hidden errors, and overall incomplete, will enhance your business’s ability to grow by providing data-driven strategic insights and produce a scalable risk management strategy.
Furthermore, with automation, your account reconciliations can be completed throughout the month allowing for variance analysis to become an ongoing, automated process that occurs and reduces financial risk on a daily basis.
As a business scales up, sources of revenue and costs expand accordingly. Very quickly, analyzing the causes of budget deviation becomes increasingly inefficient, as you are gathering records from department after department. What’s more – effective risk management is almost impossible when you are unable to track all aspects of a process reliably. As you’re probably well aware, the FP&A team’s extra work will only have a positive ROI when management can actively solve problems. Today, all of these challenges and costs can be addressed by using automation to bring together disparate records for swift analysis and comparison.
Investigating the difference between actual and planned behavior allows management to understand why fluctuations occur in the business’s balance sheet and what they can do to change the situation. Without continuous risk assessment, companies deny themselves the value that FP&A teams can contribute to the business’ strategy and positive growth. Companies must be adaptive to be able to mitigate potentially detrimental usage of the budget to stay competitive with changing markets.
Variance analysis does more than just identify the existence of financial issues—it uncovers where the issues are coming from and why revenue may be fluctuating within business units. Automated variance analysis allows you to craft a proactive business strategy even while your reconciliation and close activities are still in progress, rather than waiting on the sidelines for period end numbers to roll out.
The best risk management strategy is to ensure you stay ahead of the game. When evaluating the differences between actual and planned behavior of a business, automated variance analysis will save you time and effort while improving your risk management strategy.
To learn more about how automation can help you overcome key challenges in variance analysis and risk management for your office of finance, schedule a time to speak with one of our experts.
Written by: Chelsea Downey