Plan vs. actual analysis is a crucial tool for businesses to track their performance against their forecasts and budgets. While expensive budgeting software was once the norm for this type of analysis, nowadays, you can easily do it using Microsoft Excel or Google Sheets. In this article, we will guide you through the process of conducting plan vs. actual analysis using your accounting data and a spreadsheet.
Start by organizing your spreadsheet with categories in the leftmost column and months spread out horizontally. Ensure that your forecast categories align with your accounting categories to simplify the comparison process. Match your chart of accounts with your forecasting categories to maintain consistency and accuracy in your analysis.
When creating your forecast, keep your accounting data in view to ensure that your projected statements match the actual results. If your accounting software summarizes categories, consider using those summaries in your business plan to streamline the comparison process.
Once you have your forecast set up, you can import your actual results from your accounting software into a separate spreadsheet. Be meticulous in ensuring that the structure of your actual data matches your forecast to avoid errors in the analysis.
Calculate the variance between your plan and actual results to identify discrepancies. Positive variances indicate that you performed better than expected, while negative variances show areas where you fell short. Understanding these variances is essential for effective management decisions.
Variance analysis is a critical aspect of plan vs. actual analysis as it helps you track your performance and make informed decisions based on the results. While the calculations may seem complex, the key is to use common sense and consider the impact of the variances on your business.
Ultimately, plan vs. actual analysis is not just about numbers; it’s about leveraging those numbers to drive strategic decisions and improve business performance. By following these steps and taking a thoughtful approach to variance analysis, you can effectively manage your business and steer it towards success.