3 Steps to Make Sense of Your Cost Centre Report

Are you baffled by the sea of numbers in your cost centre report? Do you find yourself overwhelmed by variances on every line? It can feel like you have two choices: give up or get consumed by all the different numbers and become paralysed in the data.  Good news!  There is a third choice and a better way!

Here are three simple steps to help you confidently interpret your report and create meaningful insights.

1 - Develop the Story

Before diving into the numbers, think about the bigger picture. What has been happening in your department or business area? Have there been any significant changes or events that are different to what was budgeted? A common example could be you are short of staff, or you are running late on a significant project.

2 - Know What to Expect

As you review the report, ask yourself, what do you expect to see? Think about the significant things that are happening in your area.  If you are short of staff you would expect to see savings in employee costs, but you may also expect to see overspends in overtime or contract staff.  If you are late on a project, you may be incurring costs more slowly as you haven’t achieved a major milestone. This approach helps you filter through the sea of numbers and focus on key areas that truly need attention.

3 - Compare Expectations with Reality

Finally, check whether the report aligns with what your story. Are the variances on those key line items in line with your expectations?  If so, fantastic, you can now explain what is happening and focus on the decisions you can make to improve the situation.  Note, if there are other variances that don’t align with your expectations, these can be an area for further investigation but be careful not to get side tracked on small stuff before you manage the key items.

Benefits of this approach:

By following these steps, you can:

• Focus your attention on key areas of the report

• Quickly and confidently explain the key variances on your report

• Make informed decisions on how to improve (or maintain) the operational and financial performance in your area.

Next time you face a sea of numbers, remember, don’t get overwhelmed. Develop the story, check your expectations, and interpret the numbers with clarity and purpose.