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Twokin Consulting: Variance analysis for comparing results to a plan

A key driver of success for a nonprofit organization is ensuring that it has the financial resources for operations and for sustainability. Twokin Consulting recommend that at the close of each month, it is important for the key staff (Executive Director, Chief Financial Operations, Chief Operating Officer, etc.) complete a variance analysis of actual revenue and expenses to the budget amounts. Similarly, it is important to compare non-financial operational data to what was planned. A variance analysis is a tool used to compare actual results to planned results. Twokin Consulting recommends that a variance analysis explore the following factors:


Revenue variances: Compare actual revenue to budgeted revenue to identify any significant differences. Look for variances in individual revenue streams, such as donations, grants, or fundraising events.


Expense variances: Compare actual expenses to budgeted expenses to identify any significant differences. Look for variances in individual expense categories, such as salaries, rent, or office supplies.


Volume variances: Compare actual production or sales volume to budgeted volume to identify any significant differences. This can help to determine if the variances are due to changes in volume or price/cost changes. For example, did more or less clients use your services?


Mix variances: Compare the actual mix of products or services to the budgeted mix. This can help to determine if variances are due to changes in product mix or changes in selling prices. For example, was there more families versus indivuals than planned to use your services?


Timing variances: Compare the actual timing of revenue and expenses to the budgeted timing. This can help to identify if variances are due to timing differences or changes in the underlying activity levels.


Other variances: Look for any other variances that may not be easily quantifiable, such as changes in local conditions, market conditions, or unplanned events.


Based on the experience of Twokin Consulting, by analyzing these variances, it is possible to identify the root cause of any deviations from the operational plan and take corrective action to improve future performance.


Twokin Consulting specializes in helping supporting colleges, universities, and nonprofits organizations in brainstorming strategies and ideas for improving operations.


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