When is factor analysis necessary?

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Some entrepreneurs believe that it is necessary to look for reasons for unsatisfactory performance only when the plan is not fulfilled, and if the profit exceeds the planned indicators, then everything is fine and there is no need for additional analysis.

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But this is wrong - the reason must be established in the case of overfulfillment of the plan as well. Maybe there was a single large order, and it will not happen again, or maybe it was a matter of erroneous planning (the plan was initially underestimated).

Also, factor analysis of profit croatia email list can be used to compare the results of an enterprise's activities over different time periods.

Knowing why profit differs from planned or from previous periods’ figures, the manager will understand what needs to be changed in business management and what to pay attention to.

When is factor analysis necessary?

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In practice, it is impossible to obtain a profit that corresponds to the plan down to the last penny. There will always be discrepancies in one direction or another. In order not to waste time on unnecessary work, it is necessary to define the boundaries, when going beyond which the deviations should be analyzed. Two options can be used:

Take into account absolute deviation (for example, over 15,000 rubles).

Take into account relative deviation (for example, more than 5% of the planned profit amount).

Qualitative criterion. If an organization is engaged in various types of activities and one of them is not of great importance to the founders, then the analysis of deviations in profit from this work is either not carried out at all, or is done if the difference is too high (for example, more than 30% of the plan). This approach can be used if management accounting is carried out separately for each area.

Types of factors in factor analysis
An enterprise is an open system consisting of subsystems (interrelated parts). Such elements of the organization include current material assets, non-current assets, finances, personnel. In the enterprise economy, they are considered as production resources.

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The enterprise (process) and the economy play the role of the environment (according to Kleiner, the environment is a system of relationships between economic objects and the place where its processes occur).

Current material assets . This subsystem includes the organization's inventory (production stocks, finished goods in stock and shipment, work in progress). The life cycle of such elements is no more than 12 months, and for some of them this is one production cycle.

Non-current non-financial assets . These include tangible and intangible assets. These are fixed assets of production, intellectual assets, capital investments. Their life cycle is not less than 12 months.

Finance . This subsystem includes own funds and loans. This is money in kind, in the form of shares and bonds, and entries in accounts.

Personnel — the subsystem includes the employees of the enterprise. They are divided into categories: permanent and temporary workers, employees and specialists, management. Personnel is hired for a certain period of time and is related to attracted resources.

Organization . The environment consists of departments that are part of the enterprise structure, the relationships between them, the responsibilities of departments as a whole and specific employees.

Economy . The environment is represented by a list of economic characteristics of resources and financial results of the enterprise, as well as their mathematical dependence on each other.

Factor analysis of enterprise profit is a mathematical method of finding the relationship between resource parameters and financial results. Using this method, you can understand how individual factors affect the results of the organization's activities.