Mastering Variance Analysis in FP&A: A Step-by-Step Guide

🔑Performing a variance analysis involves comparing actuals with budgeted amounts to identify discrepancies.

📈Creating a year-to-date section in the template helps calculate cumulative numbers for accurate comparison.

💰Calculating variance percentages allows for better understanding of cost control and revenue generation.

📊Analyzing percentage variances helps identify areas of improvement and potential risks.

💡The template provided in the video simplifies the variance analysis process and facilitates better decision-making.

What is variance analysis?

—Variance analysis is a financial analysis technique used to compare actuals with budgeted amounts, highlighting differences or variances.

Why is variance analysis important in FP&A?

—Variance analysis helps identify discrepancies, understand performance, and make informed decisions for better financial planning and control.

What is a year-to-date section in a variance analysis?

—A year-to-date section calculates cumulative numbers for comparison to determine overall performance over a specified period.

What is the significance of calculating variance percentages?

—Variance percentages provide insights into cost control, revenue generation, and help identify areas of improvement or potential risks.

How can a template simplify the variance analysis process?

—A template provides a structured framework, automates calculations, and ensures consistency, making the variance analysis process more efficient and accurate.

00:00Introduction to the purpose of the video and helping finance professionals in their FP&A journey.

00:11Overview of performing a simple variance analysis using a template.

00:47Explanation of the template's structure and its three sheets: template, budget numbers, and actual numbers.

01:59Calculating the year-to-date section in both the actual and budget sheets.

08:02Creating data validation for selecting the month and dynamically updating the table based on the selection.

10:00Formulating lookup formulas to populate the table based on the selected month.

13:29Calculating variance and percentage variance for each line item in the table.

15:34Calculating percentage variance as a percentage of the base, either budget or actual, depending on the analysis.

17:18Demonstrating the completed template and offering links to both the empty template and the completed one.