Income variances against actual results are harder to remedy than expense variances. It is also tougher to identify the reason behind such differences. Again, you need to ask yourself some key questions:
- Is there a price variance—that is, are you selling for more or fewer dollars than expected? If so, what has been the impact on the budget? If you have had to cut prices, what can you do to make up for the deficit? What is the long-term impact?
- Are you selling more or fewer items or providing a service more often or less than anticipated? If reality differs from your original assumptions, how is actual revenue affected?
- Are buyers paying late? If the economy is experiencing a downturn, some purchasers may hold off paying until the very last minute. Delays can impact your income projections—particularly cash flow.
You can see how variances in income projections can help you determine the progress of your staff in a variety of planned efforts and also alert you to the kinds of remedial actions you will need to take to get the revenue stream to the level anticipated. While foresight is admittedly better than hindsight, once you’ve analyzed variances and determined their cause, you need to take action.