Monthly evaluations are the smart way to monitor variances in a business

How should variances be monitored in a business?

• A. Only during audits
• B. Monthly evaluations
• C. Daily reports
• D. Weekly meetings

Answer: (B)

Monitoring variances in a business, particularly in finance and performance metrics, is essential for identifying trends, addressing issues, and implementing corrective measures when necessary. Conducting monthly evaluations provides a balanced approach that allows businesses to review their performance against their budgets or forecasts regularly without overwhelming the management with too frequent updates. This timeframe is practical because it allows sufficient time to gather data, analyze trends, and understand the implications of any variances. Monthly evaluations enable teams to spot significant discrepancies while still allowing for timely adjustments. It strikes a balance between maintaining responsive management practices and minimizing the administrative burden of monitoring on an excessive frequency. Other options, while potentially useful in certain contexts, do not provide the same combination of regularity and thoroughness as monthly assessments. For instance, audits are typically conducted less frequently and do not lend themselves to the ongoing adjustments that businesses might need to stay aligned with their financial goals. Daily reports can lead to information overload and may distract from longer-term strategic initiatives. Weekly meetings, while valuable for communication, might not allow enough time for data to be meaningfully analyzed between sessions, risking superficial discussions rather than substantive reviews. Therefore, monthly evaluations emerge as the most effective method for variance monitoring.

Is variance just a fancy word for “the numbers don’t add up”? Not quite. Variances are the gaps between what you hoped to achieve and what actually happened. In a business, those gaps can tell you where you’re winning and where you’re leaking value. Think of it like checking the receipts after a busy weekend: you want to know what ran ahead of the forecast and what fell short, so you can adjust before the next cycle.

What exactly is a variance—and why should you care?

• A variance is the difference between actual results and a budgeted or forecasted figure. It can show up in revenue (did you sell more or less than expected?) or in costs (did your food costs or labor costs run higher or lower than planned?).

• There are two kinds that matter most in daily practice: revenue variances and cost variances. Revenue variances hint at promotions, seasonality, or changes in customer behavior. Cost variances point to efficiency gaps, supplier price changes, waste, or scheduling quirks.

• Why care? Because variances flag the moments when your plan isn’t matching reality. If you catch them early, you can pivot—rework menus, tweak staff schedules, renegotiate with vendors, or push a mid-month promo. If you wait, small gaps can become big problems.

Let me explain the cadence idea with a simple image: you’re steering a ship. If you only check the compass when you hit a storm (audits), you react late. If you stare at the deck every hour (daily reports), you drown in noise. If you gather signals a few times a month (weekly meetings), you may still miss the longer trends. The monthly review is that sweet spot where you have enough data to see real patterns, yet you can respond in time to stay on course.

Monthly evaluations: the balanced approach

Here’s the quick logic, in plain terms:

• Audits happen, but they’re infrequent. They’re not the clearest lens for ongoing decisions.

• Daily reports are, frankly, data overload without enough interpretation. You can miss the story behind the numbers.

• Weekly meetings are great for communication, but they can turn into status updates if there isn’t enough time for deep analysis.

• Monthly evaluations give you a meaningful slice of data to understand trends, root causes, and corrective moves without drowning in detail.

If you’re managing a small-to-mid-size operation (think a Jersey Mike’s-style shop or a handful of locations), monthly reviews strike a practical balance. You allow data to accumulate so trends emerge. You still have time to act before issues derail your goals. And you avoid the fatigue that comes with constant reporting.

How to run a monthly variance review without turning it into a grind

1. Gather the right data, reliably.

• Pull actuals for revenue, food costs, labor costs, rent, utilities, and any other fixed or variable expense you track.

• Bring in the budget or forecast for the same period. If you’re doing monthly, you’ll compare month-to-date against the plan and year-over-year where it makes sense.

• Use a consistent data source. A simple spreadsheet, a Google Sheet, or a lightweight dashboard works fine. The key is consistency—same definitions, same timeframes.

2. Compute the variances clearly.

• For each line item, calculate the variance amount and the variance percentage. A quick way: Variance = Actual − Budget; Variance % = (Actual − Budget) / Budget × 100.

• Distinguish favorable variances (you performed better than planned) from unfavorable ones (you underperformed). It’s tempting to label every variance as “bad,” but context matters.

3. Dig into the drivers.

• Don’t stop at the numbers. Ask: Why did this variance occur? Was it a price change, a shift in customer mix, a promotional carryover, or a staffing decision?

• Group variances by cause: market factors, operational changes, supplier terms, and internal decisions. This helps you target actions rather than chase every fluctuation.

4. Prioritize what to act on.

• Focus on the big hitters: variances with large dollar impact or those that affect multiple metrics (for example, a rise in food cost that also lowers gross margin).

• Use a simple filter: “high impact, reasonably controllable, and time-sensitive.” If a variance feels like a one-off blip, you don’t need it to derail your monthly plan.

5. Decide on corrective actions and owners.

• Propose concrete steps: adjust prices, modify portioning, revise supplier orders, tweak labor schedules, or run a targeted promotion.

• Assign owners and deadlines. Who will implement the change, and by when? Accountability keeps momentum.

6. Document and circulate a concise variance memo.

• A one-page summary with key variances, root causes, and action steps is plenty. Share it with leadership and with the teams closest to the affected areas.

• Follow up in the next cycle to see which actions moved the needle.

7. Learn and adapt the forecast for next month.

• Capture what you learned: did certain variances recur? Did your forecast under/overestimate seasonality? Use these insights to refine next month’s forecast.

Practical tools that keep the process smooth

• Spreadsheets (Excel or Google Sheets): fine for the lean outfit. Build a simple variance template with sections for actuals, budget, and variance, plus a short driver notes area.

• Dashboards (Tableau, Power BI, or even lightweight Google Data Studio): great if you have several locations or a wider menu. They can show trends at a glance and highlight outliers automatically.

• ERP or accounting software: if you’re running QuickBooks, Xero, or a restaurant-specific system, you can often pull variance data with built-in reports. Use those as your backbone, then layer your own analysis on top.

• KPIs to track (keep it actionable): gross margin, food cost percentage, labor cost percentage, waste percentage, inventory turnover, sales per Labor Hour, and same-store sales growth. Pick a core set that ties directly to your strategic goals.

A quick, human moment: a small story from the shop floor

Imagine you’re managing a few Jersey Mike’s-inspired locations. A new promotional combo hits unexpectedly in one region, drawing a surge of customers. Revenue climbs, but so do labor costs because you needed extra hands to handle the rush. Your monthly variance review flags a revenue uptick and a surprising rise in labor as the big variances. The driver is clear: the promo drew more customers, but you hadn’t lined up enough staff during peak hours.

With that insight, you adjust: you schedule more cooks and shift supervisors during peak days, and you adjust the promo’s timing in other locations to avoid spillover. You renegotiate a small price tweak on a couple of items with suppliers to keep food cost in line, and you launch a simplified mid-month promo to maintain the momentum without breaking the bank. The result isn’t magical, but the month ends with a tighter margin and a plan that’s grounded in real data. That’s what monthly variance reviews can do when you treat them as a practical tool rather than a paperwork chore.

Common traps and how to dodge them

• Data quality matters: bad data creates bad decisions. Double-check that your figures come from reliable sources and that the timeframes match.

• Don’t chase every variance. Small, isolated gaps often cancel out over the course of a month. Prioritize the ones that move the needle.

• Avoid overreacting to one month. Use year-over-year comparisons or rolling four-quarter views to confirm trends.

• Keep the team in the loop without turning the process into a full-day meeting. Short, focused reviews work best.

A few guiding questions to keep the process tight

• Are we comparing like with like? (Same category, same period, same cost structure.)

• What’s the biggest variance, and what’s driving it?

• Can we fix it with a revisited plan, or does it require a longer-term change?

• Who is accountable for the next action, and by when?

The bottom line

Monthly evaluations offer a practical, sensible rhythm for variance monitoring. They let you see patterns, diagnose causes, and act with purpose—without getting lost in a sea of data or bogging down your team with constant reporting. If you’re steering a small chain or a single bustling shop, this cadence helps you stay aligned with your financial goals while staying responsive to the realities on the floor.

If you’re building a framework for your business, start with a lean variance template and a short, clear memo. Keep it simple, keep it consistent, and keep the conversation moving. The numbers will speak for themselves, but the real value comes from the actions those numbers inspire.

Want to make it feel even more tangible? Try this quick starter checklist for your next monthly review:

• Pull actuals and budget side by side for every major line item.

• Note variances and categorize by driver (pricing, volume, efficiency, waste, supplier terms).

• Pick 2–3 high-priority variances and draft 1–2 corrective actions for each.

• Assign owners and deadlines, then save a one-page summary for leadership.

• Schedule a brief follow-up to confirm progress and adjust as needed.

If you walk through these steps with a calm, curious mindset, variance monitoring becomes less about chasing numbers and more about guiding your business toward the goals you’ve laid out. You’ll see the patterns, you’ll act with intention, and you’ll build a culture where data informs smarter decisions—without slowing you down.

So the next time someone asks how variances should be watched, you can smile and say: with a monthly cadence that’s clear, practical, and action-oriented. It’s enough to keep your business on track, flexible, and ready to grow. And yes, it can feel satisfying to close the month with a plan that actually makes a difference.