On Working the Plan

A Plan-vs.-Actual Example

Let’s look at a simple example of how the plan vs. actual analysis works. For the record, in accounting and financial analysis, they call the difference between plan and actual variance. It’s a good word to know. Furthermore, you can have positive or negative variance, as in good variance and bad variance. Positive Variance: It...


Plan vs. Actual Sales (variance)

So the calculations are simple enough. You calculate the variance in sales by subtracting the planned amount from the actual amount, which gives us the table shown below. I use the classic accountant’s red to indicate negative numbers, as in the phrase “in the red.” The negatives are also in parentheses. For those cases, the...


Adjusting the Sales Plan

Given what’s happened with the sales results, the plan-as-you-go planning process indicates in this example that systems sales are going badly, but there are other sales that can make up the problem. Do you change the plan? That’s where the management comes in. Get the people together and talk about it. Why are systems sales...


Starting Plan for Profit and Loss

Following the previous sales example, the planned profit and loss table in the next illustration shows a portion of the profit and loss for the sample company, as it stood in the original plan. This table shows the gross margin and sales and marketing expense area of the original plan. This is a portion of...


Actual Results for Profit and Loss

The next illustration shows the actual results recorded in that portion of the profit and loss, after the end of March. The actual results mean little without comparison with the original profit and loss table, shown previously. Unfortunately, many businesses also forget to compare the original plan to the actual results. Especially if business is...


Profit and Loss Variance

So here’s the significant view, the variance. Sales are below plan, but costs are also below plan, and let’s stop there and make a point. You can see in the illustration how sales are negative and costs are positive. If you weren’t careful, you could interpret that as sales are down and costs up, which...


Making It Work For Your Planning

So we’ve seen some simple examples, in sample financial statements, of how things can go differently than planned. The real management here isn’t just the calculations, but rather the management of the differences. You have to look beyond the numbers, talk to the people, bring these things up in the meetings so the plan stays...


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