P&L Actual-to-Plan Variance Reporting compares a company’s actual profit and loss statement results to its planned or budgeted results, revealing discrepancies and providing insights into financial performance.

Primary Implication

Without a monthly profit plan and the use of an actual-to-plan variance report, it’s impossible to confidently identify what corrective action needs to be taken because you don’t have targets you are working to achieve.

You also lose the opportunity to make fact-driven corrective action assignments shaped by the importance and urgency needed to get it done.  Timely follow-through on each assigned corrective action is the best way to avoid falling short of your profit plan goals.

Overview

Each month, perform an actual-to-plan comparison of your P&L Statement to gauge how well you are performing to expectations.

Use of the P&L Actual-to-Plan Variance Report helps you ensure that your business is on track to achieve your planned profits—the same goals you established during Business CPR™ Step 2—Build Your Twenty-Four-Month Profit Plan.  Here, you’ll confirm your actual performance against your planned performance by month and year-to-date.

• • A positive variance indicates that your actual performance is exceeding planned.
  • An unfavorable variance tells you where you fell short relative to your profit plan targets.

Any negative actual-to-plan variance will cause you to miss that planned amount unless a corresponding positive variance in another area can correct for the miss. You can avoid these misses by identifying what corrective action needs to be taken, who is responsible for accomplishing it, and when it needs to be completed. Timely follow-through on each assigned corrective action is the best way to avoid falling short of your profit plan goals.

It’s important to remember the following in learning from your “Variance to Plan” report:

1. The “Percent of Budget” calculates the degree to which the actual result met the budgeted expectation.  Any number greater than 100 percent indicates that the actual was higher than planned.
2. When considering Revenue, this is a good variance to have; for Overhead, this is a lousy variance.  Consider the following core questions:

• • • Did the budgeted Gross Profit percent come in as expected, regardless of the actual revenue dollars for the given review period?
    • Did the budgeted Operating Income percent come in as expected, regardless of the actual revenue dollars for the given review period?

Without a monthly profit plan and the use of an actual-to-plan variance report, it’s impossible to confidently identify what corrective action needs to be taken because you don’t have targets you are working to achieve.  You also lose the opportunity to make fact-driven corrective action assignments and how much urgency is needed to get it done.