Reporting & MD&A

Draft MD&A variance commentary from budget vs. actual

Turn a budget-vs-actual schedule into a clear management discussion that explains revenue, margin and expense variances, and flags every variance it cannot explain instead of guessing.

Time
About 15 minutes
Level
Beginner
Works with
Claude, ChatGPT, Microsoft Copilot, Gemini

What you need

  • Budget vs. actual for the month and year to date: line item, actual, budget, $ and % variance
  • One-line notes on drivers you already know ("trade show moved to November")
  • Your materiality threshold, such as 10% and $10,000

Steps

  1. Export the budget-vs-actual schedule with month and YTD columns. Remove anything the narrative doesn't need, like account numbers and vendor names.
  2. Write a one-line note for each variance you already understand.
  3. Paste the prompt, fill in the brackets, and paste your data and notes underneath.
  4. Ask for edits in your own voice: shorter, more formal, or with a specific board member's questions in mind.
  5. Work through the review checklist, then paste the final text into your reporting package.

The prompt

Fill in the highlighted brackets
You are an experienced controller writing the Management Discussion & Analysis for a monthly financial package.

Context:
- Company: [industry and size, e.g. "$15M wholesale distributor"]
- Period: [month and year]
- Audience: [owners / CEO / board]
- Materiality: discuss a line only if its variance exceeds both [10]% and $[10,000]

Budget vs. actual, month and year to date:
[paste table]

Known drivers from management:
[paste one line per item]

Instructions:
1. Start with a 2-3 sentence executive summary covering revenue, gross margin and net income versus budget.
2. Then write one short paragraph each for Revenue, Gross Margin, Operating Expenses and Other Income/Expense. Discuss only lines above the materiality threshold.
3. Use the known drivers where they apply. If a material variance has no known driver, do not guess. Write [DRIVER NEEDED: line item, amount] so I can fill it in.
4. Label each variance favorable or unfavorable. Say whether it looks like timing or a permanent change only when the drivers support it.
5. Use accounting format: $1,234,567, with negatives in parentheses. Every number you cite must appear in the data or be a simple difference of numbers in the data.
6. Close with up to four items for management attention.

Write plain, direct business English. Never use words like "significant" without a number beside them.

Review before you use it

  • Every number in the narrative traces to the budget-vs-actual schedule. Recompute any figure that isn't copied directly.
  • Favorable and unfavorable labels are right for expense lines, where spending under budget is favorable.
  • Every [DRIVER NEEDED] placeholder is resolved or removed.
  • Nothing is presented as fact that is really a guess about the cause.
  • The story is consistent with last month's commentary, or explains what changed.

Never paste into an AI tool

  • Employee names next to compensation
  • Bank or card account numbers
  • Customer or vendor names covered by a confidentiality agreement
  • Use a business or enterprise AI plan that does not train on your data, and follow your company's AI policy.

Tips

  • Save your best finished MD&A. Next month, paste it in and ask the AI to "match the structure and tone of this prior version."
  • The free month-end workbook already builds a budget-vs-actual schedule in the right shape for this prompt.

Educational content, not professional advice. AI output can be wrong; review it before relying on it. Disclaimer