Writing variance commentary owners actually read
Most variance commentary restates the numbers. Good commentary explains them. A simple structure that works.
Many monthly reports include a page of commentary that says things like "revenue was $50,000 above budget." The reader can already see that in the table. Useful commentary explains why, and what it means for the rest of the year.
Lead with what matters
Start with the two or three items that changed the month or the outlook. Not every variance deserves a sentence. Set a threshold, such as a dollar amount or a percentage, and stay quiet below it.
Explain the cause in operating terms
Revenue was above budget because volume at two locations ran ahead of plan, or because a price increase took effect earlier than assumed. Costs were higher because of overtime during a staffing gap. Tie each variance to something an operator recognizes.
Separate timing from trend
A variance caused by an invoice landing in a different month will reverse. A variance caused by lower volume may continue. Saying which is which is the most useful thing commentary can do.
Say what happens next
- Does the forecast change?
- Is action needed, and who owns it?
- When will we know more?
Keep it short
A good commentary page fits on one page. Owners and board members read a lot of reports, and short, specific writing is what gets read.
A simple template
For each major item: what happened, why it happened, whether it's timing or trend, and what we're doing about it. Four sentences per item is usually enough.
Commentary is where a finance team shows it understands the business. Over time, it's also what earns finance a seat in the decisions that follow.