Quais são as vantagens e desvantagens de usar orçamentos flexíveis para análise de variância?

In my experience, the variance analysis, once completed, is most useful as a basis for an ongoing conversation throughout the fiscal year, between operations leaders and their financial accountability partners, and then operations leaders and their operations teams. Regardless of the outcomes the analysis and corresponding decisions acts as a rudder to steer the company. I’ve seen enough to know that results aren’t always typical and the readers of the analysis needs to know the business and it’s particular nuances, on a department-by-department basis, to get the most value. I prefer static budgets, and people engagement and decision making, to achieve the most from variance analysis. Flexible budgets does more to confuse, than help people

Variance analysis is a critical facet of financial management. At its core, it contrasts actual business performance against projected budget figures. By doing so, it surfaces discrepancies or "variances." These differences can be quantitatively gauged, revealing the extent of divergence, and qualitatively assessed to pinpoint underlying causes. This scrutiny is vital: it shines a light on inefficiencies or unforeseen outcomes, offering a diagnostic tool for financial health. Armed with insights from variance analysis, organizations can recalibrate strategies, ensuring alignment with fiscal goals while refining future forecasting methodologies.

I think variance analysis is more meaningful when it is presented in a holistic manner. i.e. a favorable variance in the case of revenue means, when the actual revenue is higher than the planned one. But if we ignore the related cost variance, we may end up with wrong conclusion. Make sure that such favorable variance should not be offset by other unfavorable variance.

Variance analysis is a powerful tool for any business. It's not just about numbers, it's about making informed decisions. By pinpointing the root causes of the unfavorable variance, they're taking proactive steps to enhance efficiency and cost-effectiveness. It's a reminder that real-time data analysis isn't just about identifying problems; it's about finding solutions and driving continuous improvement.

Variance analysis put simply is comparing planned outcome with actual outcome and understanding the difference. Once identified, you need to dig deeper on the root cause of difference and which entity is accountable for it.

I somewhat disagree. In my experience the team is focusing on production, not variance analysis, but should know when they are not hitting their mark. It seems to me that flexible begetting would serve to mask those wrong turns or off decisions made by team members. If the owners is willing to put aside the shared mission of the organization and just look to the bottom line results, regardless of how you get there, then perhaps, flexible budgeting could work.

Flexible budgets in variance analysis = adaptability. They adjust budgeted amounts based on actual activity. For example, selling 12,000 units at $48 each means a flexible budget shows $576,000 revenue, not the static $500,000. Variable costs flex too, fixed costs stay put. Bottom line: Flexibility = Real Insights!

I have worked with companies that keep the budget fixed but when reporting Actuals they first report revenue at budget price and actual volume, then calculate any price variance to show the total revenue. This way, you can see both the variance in revenue due to a volume change and the variance in revenue due to price change. When reporting in retail sector, across multiple SKUs and customers, this is crititical.

The dance of numbers reveals much, especially when flexible budgets lead the waltz in variance analysis. Their rhythm offers: Adaptability: Adjusts to real-world conditions, capturing actual versus expected performance. Precision: By aligning with actual activity levels, it offers a truer performance comparison. Insight Depth: Helps distinguish between operational efficiency variances and those due to external factors. Proactive Management: Allows teams to respond in real-time, making course corrections as needed. The beauty of a flexible budget isn't just in its adaptability, but in the clarity of the tale it tells. It's the bridge between aspiration and reality, making every step of the financial dance count.

I disagree with this logic because I believe this assertion asks too much of this method and has unrealistic expectations of the communication benefits, only because how often are these kind of interdepartmental conversations happening? I have seen that it is more often the case that an organization is sold a new system that promises a lot, and it sounds good, but as usual, the new system is underutilized and you really don’t get what you’re paying for. A clear and well embraced mission, yields the best intended outcomes. Big systems (I.e. AI and such) are bigger than people, and mostly serves the individual/s that implement them.

Flexible budgets offer several advantages for variance analysis. They provide a more realistic comparison of actual results with budgeted results by adjusting for basic levels of activity or output. This helps managers isolate and measure the effects of changes in activity on revenues and costs and evaluate operational efficiency under different conditions. Furthermore, flexible budgets facilitate interdepartmental communication and coordination by providing an everyday basis for performance measurement and feedback, promoting a more cohesive and effective organizational strategy.

Flexible budgets are a variance analysis game-changer, allowing for a more accurate comparison of actual vs. budgeted results. They're like a financial magnifying glass, revealing hidden insights.

while flexible budget seems attractive and modern, they need to be adjusted with buffer. I have seen in many budgets that flexibility is confused with lack of planning.

An example I’ve seen is that it’s just too confusing for the average manager, who may not need this, as a tool, and it ends up throwing them off and not providing what they need. You can explain why it’s there, but it can kind of get in the way. I believe managers should be tuned in to the mission, their roles in delivering on that mission, as well as being in tune to the “5 year plan “ because it stretches their focus beyond immediate results and towards achieving the long term objectives of the mission.

While flexible budgets are a valuable tool, it's worth noting that they can be more time-consuming to prepare and maintain compared to static budgets. This extra effort is the trade-off for their adaptability. To maximize their benefits, it's essential to strike the right balance in budgeting efforts.

As a former CFO of a furniture manufacturer, I've used flexible budgets in variance analysis to manage costs effectively. For instance, our production costs vary with the number of units produced. A static budget would show unfavorable cost variances if we planned to have 1,000 chairs but produced 1,200. However, a flexible budget adjusts for this higher production level, providing a more accurate cost per unit. This allowed us to understand better whether cost overruns were due to inefficiencies or higher production volume.

Budget variances are a financial reality for every business. They serve as valuable feedback, pointing out the gaps between our plans and actual results. By understanding the causes, categorizing them, and taking appropriate actions, we can refine our financial strategies and improve accuracy in future budgets. It's a crucial part of the financial journey.

In the symphony of financial analysis, flexible budgets are the dynamic crescendos, adapting in rhythm with changing tunes. To harness their power effectively, start by basing them on realistic activity levels, ensuring they ebb and flow with actual operations. As the fiscal period unfolds, compare this adaptable budget to actual results, highlighting the nuances in variances. But, go beyond the surface. Dive deep to decipher whether variances stem from operational inefficiencies or external factors. And always, always iterate. Reflect on the insights, adjust, and refine. With flexible budgets, we don't just chart financial movements; we dance alongside them, ensuring every step is in tune with our goals.

I believe that there is a place for the flexible budget analysis, but it should be a shadow tool for learning, augmented into the decision making process, but off the playing field, the same way as the coaches at football games whose place is up high in the booth observing and learning in real time, and whose job is to propose or make in the moment changes to actual plays, whenever the situation dictates. The practiced plays is what’s important to winning under normal circumstances. Next year’s plan can be altered from what the flexible budget variances teach you this year, but I say commit to your plan, run it, then learn and grow from it.

Eu acredito que o principal é fazer o redirecionamento das necessidades para um orçamento mais realista, seja para mais ou menos, e identificar as necessidades de acordo com o tamanho da operação que a companhia precisa para atender clientes, credores e seus acionistas.

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