Net Income variance analysis
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Net Income variance analysis
And
Management of Finance
Variance Analysis
Variance analysis is most important part of management for achieving the business goal through budget setting, comparing the actual performance with the budget and then analyzing the variation thereof to take appropriate measure accordingly.
Following is the table for variance analysis
| Budget | Actual | Variance | Variance | |
| Jan – Jun 2016 | Jan – Jun 2016 | $ | % | |
| Income | ||||
| Investments | 1,50,000 | 1,00,000 | 50,000 | 33.33% |
| Sales | 6,97,500 | 5,80,000 | 1,17,500 | 16.85% |
| Available cash | 80,000 | 90,000 | -10,000 | -12.50% |
| Total | 9,27,500 | 7,70,000 | 1,57,500 | 16.98% |
| Expenditure | ||||
| Materials | 1,10,000 | 98,000 | 12,000 | 10.91% |
| Utilities | 12,000 | 11,500 | 500 | 4.17% |
| Marketing | 5,000 | 7,500 | -2,500 | -50.00% |
| Insurance | 10,000 | 13,000 | -3,000 | -30.00% |
| Taxes | 15,000 | 15,000 | 0 | 0.00% |
| Salaries & hourly wages | 3,80,000 | 4,25,000 | -45,000 | -11.84% |
| Other | 78,000 | 60,000 | 18,000 | 23.08% |
| Total | 6,10,000 | 6,30,000 | -20,000 | -3.28% |
| Surplus/Deficit | 3,17,500 | 1,40,000 | 1,77,500 | 55.91% |
Contingency plan to prevent overspending throughout the rest of the build
There should be contingent plan that in order to have check on the spending in course of building. This plan can be implemented through continuously monitoring the variance of actual expenditure with that of budgeted figure and take appropriate measure immediately. The reason for variances could be –
- Wastage of materials;
- Increase in price of material.
Management of Finance
Recommendations to improve financial policies for proper financial management –
- All the financial must be prepared in consultation with the concerned employee effected by the policy and the same should be reviewed by the higher management to ensure that the policies are effective and also having proper control over those policies. Any amendment to these policies should also follow the same path;
- There are different financial policies implemented in the company for management of financial activities, but these policies need to be integrated so that one does not conflicts with another;
- The finance policies after being prepared should be properly and securely shared with the concerned employees so that they can manage their work accordingly.
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