Plan vs. Actual, Part 1: Implement Your Plan and Keep It Alive 3

As you review implementation results with the people responsible, you will often find the need to set new goals and make course corrections. Keep track of the original plan and manage changes carefully. Although changes should be made only with good reason, don’t be afraid to update your plan and keep it alive. LivePlan has Planned, Actual and Variance tables, complete with linked formulas, to facilitate active cash flow analysis.

Prescription for live planning

  1. After your plan starts, save a copy of your plan in LivePlan and then type actual results into the sales forecast, profit and loss, and milestones Actual tables. Then watch what the variance views tell you.
  2. Note when actual results indicate you need to make changes.
  3. Stay in the LivePlan Actual mode and make adjustments to future months of your Actual cash plan. After all, it is already more accurate than the original plan, because it has actual results for the months already completed.
  4. As each month closes, type actual results over your revised plan numbers into the Actual area.

The starting sales plan
The example begins in this first illustration with the sales forecast imported from a finished business plan, developed in LivePlan.

Illustration 1: Beginning Sales Plan

Actual results for sales
In the next illustration, you see the actual results for the same company for the first three months of the plan, at the end of March, showing actual sales numbers.

Illustration 2: Actual Sales Results

Plan vs. actual sales
The third illustration below shows you the plan vs. actual results (or variance) for this hypothetical company. The Management Dashboard in LivePlan 11.0 automatically shows plan vs. actual results for the different tables.

Illustration 3: Sales Variance

As you look at the variance for the sales forecast for the first three months, you should see several important trends:

  1. Unit sales of systems are disappointing, well below expectations.
  2. The average revenue for systems sales is also disappointing.
  3. Unit sales for service are disappointing, but dollar sales are way up.
  4. Sales are well above expectations for software and training.

Adjusting the sales plan
One of the main advantages of creating a plan on a computer is how easily you can change it. Month by month, as you record your actual results, you can make changes to your plan in the future months of the actual tables, preserve the plan tables, and be able to see the plan vs. actual variance.

In this example, if the company knows by March that sales will be different than planned in April, they should estimate the revised forecast, as a correction to future results. When the actual results are available, they can then replace the revised plan numbers with actual results. The actual results area can then become a plan area for course corrections.

Compare the difference in the February and March columns in Illustration 1: Beginning Sales Plan (the original plan) above, and Illustration 4: Adjusted Sales Plan in Actual Table, (the actual results area).

Illustration 4: Adjusted Sales Plan in Actual Table

Illustration 4 shows how this company makes its course corrections with revisions in the April and May columns of the Sales Forecast Actual table, even before they happen, to reflect the changes shown in the January-March period. Since the company knew systems sales would be down, they planned on it and made a revised forecast in the actuals area. The same revision affects projected profits, balance sheet, and–most importantly–cash.

Continue reading about Growing your Businesses and Plan vs. Actual in Part 2 of this series.

About the Author Tim Berry is the founder of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry. Follow Tim on Google+ Read more »

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LivePlan: Online Business Planning Software

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