There are two ways to run a business.
One is based on trust and intuition. You ask what happened, you get an explanation, and you decide whether it makes sense. The other is based on facts. You calculate exactly which driver caused the variance, by how much, and whose decision produced it.
Most companies think they do the second. Most actually do the first.
Managing on trust and intuition
Trust and intuition cannot be measured precisely. But intuition always kicks in first. Say your subordinate explains a revenue decline by falling volumes. You check shipment data and confirm — yes, volumes did fall. But you know that discounts and prices also affect revenue. You look at the average values of those metrics and realize that getting a clear overall picture is becoming difficult. That is when trust takes over. You enjoy working with this person, what they say roughly aligns with what you sense yourself, and they have never argued with you before. You accept their explanation.
Managing on facts
Managing on facts is a different matter entirely. Your subordinate explains the revenue decline by falling volumes just the same. But you open Fincontrollex Variance Analysis and see:
- Volume decline reduced revenue by −$100K (−15%)
- Loss of active trade points reduced revenue by −$44K (−4%)
- Shift in mix toward lower-priced products reduced revenue by −$56K (−5%)
- Price reduction reduced revenue by −$83K (−7%)
- Higher discounts reduced revenue by −$237K (−20%)
The picture changes. And specific questions immediately follow: which products saw the volume decline? Which trade points did you lose? Which branches reduced volumes, prices, and discounts the most? Who gave which clients a price cut or an increased discount?
With Fincontrollex Variance Analysis, you can drill down into variances to whatever level you need — until you see exactly who or what changed your result. The level of your questions changes too. Instead of the abstract "why?", you ask a specific question about a specific change and get a specific answer. Or you do not get one — but that already tells you something about your manager's competence.
If you prefer managing on facts rather than on trust and intuition, Fincontrollex Variance Analysis is your tool. It does not matter what you manage: the entire company, sales, production, or logistics. You will always get specific answers to specific questions.
You can explore all the capabilities of Fincontrollex Variance Analysis and request a free demo on the product page.