Mastering Financial Modelling in Microsoft Excel 3rd edn, 3rd Edition

10

Variance analysis

Introduction

Cash flow budgets

Monthly cash model

‘Flash’ report and graphics

Summary

INTRODUCTION

Variance analysis compares standard or budget performance with actual performance. The previous chapter was concerned with forecasting and projecting financial statements from annual reports, whereas this chapter deals with pinpointing significant variances against a budget for management attention. Normally data is processed at the end of an accounting period and is already out of date before management can take corrective action. This approach, however, attempts to pick out only those variances which are large enough to merit extra action over and above repetitive minor differences.

The advantages of this approach are: ...