Start with business drivers
Connect revenue and costs to understandable drivers such as customer numbers, order volumes and production capacity. These links help explain results and reveal what needs to change operationally to achieve a financial objective.
Test more than one possibility
Build a base case and test influential variables such as price, volume, cost and collections. The aim is to understand possible outcomes and responses as conditions change, with the assumptions behind each scenario clearly documented.
Connect reviews to action
When reviewing variances, identify the cause, owner and proposed action. Update forecasts as information changes while retaining the original budget as a reference for accountability and learning. Planning and review then remain connected to the business.
This article provides general educational information. Appropriate decisions depend on each organisation’s circumstances and data.