What is it?
Plan vs. actuals is a comparison tool. You can evaluate your company's performance against its expectations. By comparing forecasted figures (the plan) with actual results, you can identify variances, understand underlying causes, and adjust strategies as needed.
What does it tell me about my company?
Plan vs. actuals tells you a lot about the financial health, performance, and operational efficiency of your company. It provides insights into how well your actual results align with your expectations and highlights areas where the business may need to adjust. Here’s what it reveals:
- Financial health and stability: by comparing planned revenue, costs, and profits with actual outcomes, you can gauge your business’s financial health. If your actual results meet or exceed expectations, it indicates strong financial management, healthy cash flow, and effective cost control. Significant discrepancies, however, may suggest liquidity issues, cost overruns, or sales challenges that could affect stability.
- Operational efficiency: the gap between planned and actual results reveals operational efficiency. If costs are higher than expected, it might point to inefficiencies in production or procurement. Lower-than-planned revenues could indicate weaknesses in sales, marketing, or customer acquisition efforts.
- Accuracy of forecasting and planning: frequent variances between plans and actual outcomes may signal that initial forecasts were too optimistic or conservative.
- Risk management: large variances often highlight potential risks, whether financial, operational, or market-related. For instance, higher-than-expected costs could indicate issues with raw material prices, labor, or inefficiency. Lower-than-expected revenue may signal reduced customer demand or increased competition. Monitoring these gaps allows you to spot and address risks early.
- Resource allocation and capital efficiency: tracking actual versus planned performance helps assess resource efficiency. If spending exceeds budget without corresponding revenue growth, it could indicate poor capital allocation.
- Investor and stakeholder confidence: when plans and actual results align consistently, it signals strong management, enhancing confidence among investors, lenders, and other stakeholders. It reflects financial discipline and an ability to execute strategies effectively.
What are the underlying data sources?
Plan vs. actuals is based on your business plan, cash transactions, accounting and revenue data. You can choose, which data source you want to use for the actuals.
