| name | variance-commentary |
| description | Write variance commentary that tells a story instead of restating a table — templates for revenue, GM, opex, EBITDA, FCF with named drivers + materiality threshold applied. Source-cite every number. Used by `fpa-analyst` (primary) + `board-pack-composer`. |
Skill: variance-commentary
Purpose: How to write variance commentary that tells a story instead of restating a table. Used by fpa-analyst (primary), board-pack-composer, and any agent that produces a variance walk.
When to use
- Monthly / quarterly variance walks for management review
- Variance commentary inserts for board / investor packs
- Forecast accuracy reviews
- Pre-audit "explain the year" sessions
The shape of good commentary
Bad commentary describes the variance:
Revenue was $1.2M below plan, driven by lower new bookings.
Good commentary names the driver:
Revenue was $1.2M below plan because two enterprise deals (Customer A, $600K; Customer B, $550K) slipped from Q3 to Q4. Both are on Q4 close lists with weighted probability >70%. Net impact: Q4 will overshoot if both close; FY guidance unchanged.
The bad version restates the table. The good version tells the reader why, what's next, and what to do with the information.
The variance-commentary canvas
For each material variance, write:
- What happened. One sentence with the size of the variance.
- Why it happened. One or two sentences with the actual driver, named specifically. Not "lower bookings" — which bookings, which customers, which segment.
- Direction over time. Is this a one-time event, a trend, or part of a normal seasonal pattern?
- Impact on the outlook. Does this change the forecast for the next period? The full year? The strategy?
- What's being done. Who owns the response, what's the next-action / next-decision-point.
Variance walks for the canonical P&L lines
Revenue
- Rate vs volume vs mix vs FX decomposition. State which moved.
- For ARR: new vs expansion vs churn vs FX (if multi-currency).
- For services: hours billed × rate × utilization, separate each driver.
Gross margin
- Mix shift (higher- vs lower-margin product / segment)
- Pricing changes
- Direct cost movements (COGS line items)
- One-time items (inventory write-down, refund reserve true-up)
Operating expense (by function)
- Headcount actual vs plan, ramp timing
- Comp & benefits true-ups (commission, bonus accrual, payroll tax)
- Discretionary spend (marketing programs, travel, professional services)
- One-time items (severance, legal settlements, restructuring)
EBITDA bridge
- Show the bridge from prior period or plan: starting EBITDA + each material driver (signed) = ending EBITDA. Each step on the bridge tied to a P&L line and an owner.
Free cash flow
- EBITDA → working capital change → capex → cash interest → cash tax → FCF
- Working capital drivers (AR aging, AP timing, inventory build)
- Capex commitments coming due vs deferring
Materiality
Declare the threshold up front:
Commentary covers variances ≥ $50K or ≥ 5% of the line, whichever is greater.
Without this, you waste hours on noise and miss real signal.
Common pitfalls
- Restating the table in prose. "Revenue of $5M is $1M below the $6M plan." That's the table; that's not commentary.
- Naming a driver too high. "Lower demand" is not a driver. "Lower demand in vertical X due to [specific event]" is.
- Anchoring on the variance, not the absolute number. A 50% favorable variance on a tiny line is rarely worth commentary; a 2% unfavorable on the largest line might be.
- Confusing timing with miss. A deal that closes in October instead of September is timing; a deal that's not closing is a miss. They have different responses.
- No outlook implication. Commentary without a "what does this mean for next period" is half-finished.
- Forecast revisions reported as "same as last month." If the forecast didn't move when reality moved, the forecast is broken.
The 80/20
Most board / management readers can't internalize more than 5-7 variances. Pick the largest by absolute dollar (not %), comment on those well, and put the rest in a table with one-liner explanations in an appendix.
See also
