I went shopping this weekend and had the best of intentions. Told myself I would only buy what I needed. Then came home with four candles. Five hand soaps. Lotion and bath gel. Few hand sanitizers. Several pairs of festive holiday socks. A few things for my kids. And the actual things I needed. You could say there was a bit of variance between the planned shopping trip and the actual shopping trip.
Operating Variance Forecasting is an important part of scenario-based planning and forecasting. The analysis of this type of forecasting involves studying the difference between the planned or standard numbers and the actual numbers. Variances can occur with things like materials and labor overhead, as well as within fixed overhead.
It is imperative to analyze the operating variances
In order for your organization to reach your long-term goals, it is imperative to analyze the operating variances. This type of analysis can help you to see potential problem areas, increase your efficiency, and determine the sustainability of favorable variances. To effectively forecast, it is necessary to understand the variance, both favorable and unfavorable that may arise. Looking for trends in the variances can help create a more solid forecast. Also deeper analysis of the timing of these variance can create a deeper understanding of the impact they may create on your organization and the market. All of this leads to data that is valuable for the decision-making team of your group. With smart and fast technology, you can view this data and implement strategies to make immediate changes.
One thing is for sure – our lives are full of variance during this global pandemic. What once seemed fixed, may now be in flux. Acknowledging and preparing for these variances help develop strong businesses and organizations. But I am pretty sure candles and lotions don’t fall under operating variances. I think that’s just a complete lack of willpower!