Variance analysis is a key statistical tool used in operational and financial data for project management. Integral to ensuring short-term as well as long-term success of projects, variance analysis allows an organization to pinpoint risks, opportunities, patterns, issues and areas of improvement in the way a project is functioning.
So what is variance analysis anyway? Simply put, it is the difference between the planned and actual finances. Efficient project cost tracking often employ variance analysis to help managers in their project budgeting efforts. The quantitative financial data are evaluated using variance analysis at regular intervals to determine where the project is headed in terms of costing and profitability.
SolutionCorp closely integrates variance analysis into its project budgeting and project cost tracking software, giving managers the power to track the difference between their planned and actual expenditures at every step.
In fact, the project performance module of the software employs variance analysis to deliver key metrics about the status of various projects. The manager can find a summarized performance reporting for each of their projects in this module. This reporting will cover financial summaries of project as well as that of labor working on the project, since labor costs are an essential part of the overall project budgeting.
The project summary will showcase project name, customer name, current project status, planned and actual billing, expenses, labor, overhead costs, total costs, revenue, profit and profit percentage, and variance between these planned and actual parameters.
On the other hand, the labor summary will consist of departments working, activities performed, planned hours and costs, actually spent hours and costs, and finally the variance calculation between the planned and actual hours and costs.
Such a comprehensive overview of the project performance with variance analysis will empower managers with concrete financial data analysis results for making informed decisions for the future.