What are the best practices for performing variance analysis with performance reporting tools and software?

3 Collect and validate your data

The third step in variance analysis is to collect and validate your data. It is essential that the data is accurate, complete, consistent, and relevant, as any errors or discrepancies can affect the quality and reliability of your variance analysis. You must also make sure that your data is aligned with your variance metrics and thresholds, and that it reflects the current and realistic conditions of your business environment. Automated data extraction and integration tools or software can connect to data sources, such as accounting, sales, or CRM software. Data cleansing and standardization tools or software can help detect and correct any errors, duplicates, or outliers in your data. Additionally, data quality and governance tools or software can monitor and enforce data policies and rules such as security, privacy, and compliance.

4 Perform and interpret your variance analysis

Performing and interpreting your variance analysis is the fourth step in the process. You should use performance reporting tools or software to calculate and display your variance metrics, compare them with your variance thresholds, and generate and present your variance reports. When performing and interpreting your variance analysis, consider using data visualization and dashboarding tools to create and customize your reports; scenario analysis and forecasting tools to simulate and project different outcomes; alerts and notifications tools to track and monitor your results; as well as collaboration and sharing tools to communicate with team members, managers, or stakeholders.

5 Identify and address the causes and effects of your variance

The fifth step is to identify and address the causes and effects of your variance, which are the reasons and implications of your performance gaps. You should use your variance analysis to understand and explain the factors and drivers that contributed to your variance, such as internal factors like operational inefficiencies or cost overruns, external factors like market conditions or customer behavior, or random factors like errors or outliers. Additionally, you should use your variance analysis to assess and evaluate the impacts and consequences of your variance, such as financial impacts like revenue loss or profit decline, strategic impacts like market share erosion or competitive disadvantage, and operational impacts like resource allocation or budget adjustment.

6 Implement and monitor your corrective and preventive actions

The sixth and final step is to implement and monitor your corrective and preventive actions, which are the solutions and recommendations that you derive from your variance analysis. You should use your variance analysis to identify and prioritize the areas that need improvement or intervention, as well as formulate and execute the actions that can address or prevent your variance. Additionally, you should measure and track the effectiveness and efficiency of your actions, making any necessary changes or modifications. To do this, you can utilize action planning and management tools or software to define and assign your actions, set goals and deadlines, and monitor progress and results. Furthermore, feedback and evaluation tools or software can help collect and analyze the team’s, managers’, or stakeholders’ opinions on your actions. Finally, performance review and improvement tools or software can help review and update variance metrics, thresholds, data sources/systems, and performance reporting tool/software.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?