FP&A case study · BrightPath Analytics, Inc.
Budget Variance & Driver-Based Forecast
A June-2026 performance review and reforecast for a B2B subscription business: monthly budget-vs-actual variance analysis, a driver-based H2 rolling forecast with scenario switching, and a cash-adequacy test against a $1.0M minimum cash policy.
The hiring plan is not affordable as budgeted. On the base case the company breaches its $1.0M minimum cash policy in August 2026 and ends the year at $656.7K, which is $343.3K below policy. Retention, not sales, is the binding constraint.
01 · The brief
A June review and a reforecast
BrightPath Analytics is a B2B subscription software business selling analytics to small and mid-sized retailers on month-to-month contracts. Six months into FY2026 the results are behind plan, and the CFO needs to know why, what the rest of the year now looks like, and whether the approved hiring plan is still affordable.
That breaks into three pieces of work: explain the year-to-date variance against its operating drivers, rebuild the July to December forecast from those drivers under Base, Upside and Downside cases, and test the resulting cash balance against the company's $1.0M minimum cash policy.
Note on the source. BrightPath Analytics is a fictional company. The scenario, its 24 months of history, the approved budget and the cash policy were supplied as a practice brief rather than drawn from a real business. The variance analysis, the driver based forecast, the scenario mechanics and the conclusions below are original work built from that data.
02 · Variance
Where the year went wrong
Revenue missed plan every month of the first half. The gap is small in percentage terms, 3.4% year to date, but it lands almost entirely on gross profit, and at this margin structure there is not enough operating expense flexibility to absorb it.
Figure 1 Monthly revenue against budget. Actual revenue is flat while the plan assumed steady growth, so the shortfall widens through the half, from $18.4K in January to $56.5K in June.
| Metric | June 2026 | Year to date | Commentary | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Actual | Budget | Var $ | Var % | F/U | Actual | Budget | Var $ | Var % | F/U | ||
| Revenue | 1,138.6 | 1,195.1 | (56.5) | -4.7% | U | 6,813.8 | 7,053.9 | (240.1) | -3.4% | U | Fewer customers and slightly lower ARPU than planned. |
| Total COGS | 285.3 | 283.2 | 2.1 | 0.7% | U | 1,701.0 | 1,680.6 | 20.4 | 1.2% | U | Hosting costs running above plan as a percentage of revenue. |
| Gross profit | 853.3 | 911.9 | (58.6) | -6.4% | U | 5,112.8 | 5,373.3 | (260.4) | -4.8% | U | Revenue shortfall compounded by elevated variable hosting cost. |
| Sales & marketing | 362.1 | 359.6 | 2.5 | 0.7% | U | 2,111.0 | 2,130.2 | (19.2) | -0.9% | F | Modest favorable spend variance partially offsets revenue. |
| Research & development | 335.2 | 338.6 | (3.4) | -1.0% | F | 1,997.4 | 2,013.6 | (16.2) | -0.8% | F | Favorable on delayed hiring and lower contractor expense. |
| General & administrative | 178.0 | 177.8 | 0.2 | 0.1% | U | 1,082.1 | 1,066.8 | 15.3 | 1.4% | U | Unfavorable on legal, insurance, and administrative costs. |
| EBITDA | (22.0) | 35.9 | (57.9) | -161.4% | U | (77.7) | 162.7 | (240.4) | -147.8% | U | Gross-profit pressure exceeds operating-expense savings. |
| Net income | (81.0) | (24.1) | (56.9) | -235.5% | U | (431.7) | (197.3) | (234.4) | -118.8% | U | Driven primarily by the EBITDA shortfall. |
Figures in $000. Cost lines are flagged favorable when spending is below budget.
Figure 2 Year-to-date EBITDA bridge. Budgeted EBITDA of $162.7K becomes an actual loss of $77.7K. Revenue alone accounts for $240.1K of the $240.4K total miss. The operating expense savings in R&D and sales & marketing are almost exactly cancelled by higher hosting costs and G&A.
Figure 3 Monthly EBITDA against plan. Every month after January is negative, and the gap widens as budgeted headcount comes on against revenue that is not growing.
03 · Drivers
Retention is the problem, not acquisition
Decomposing the revenue miss into its operating drivers isolates where management should act. New customer volume is modestly behind plan and pricing is close to target, but churn is running 23% above the budgeted rate, and that is what is eroding the base.
| June operating driver | Actual | Budget | Variance | F/U |
|---|---|---|---|---|
| Ending customers | 1,366 | 1,421 | -55 | U |
| New customers | 41 | 45 | -4 | U |
| Churn rate | 3.08% | 2.50% | +0.58 pts | U |
| ARPU | $811 | $820 | -9 | U |
Churn is monthly, applied to beginning customers. ARPU is blended subscription revenue per average active customer.
The arithmetic is unforgiving. At a 2.50% budgeted churn rate, 45 new customers per month grows the base. At the actual 3.08% rate, roughly 42 customers leave every month against 41 arriving, so the company is running hard to stand still. Ending June customers are 1,366 against a plan of 1,421, and every one of those 55 missing customers carries approximately $811 of monthly revenue.
04 · Forecast
Rebuilding July through December
The second half is rebuilt from the drivers rather than extrapolated. New customers, churn and ARPU are each set off their latest actual run-rate and flexed by a scenario multiplier, so the customer base rolls forward month by month and revenue falls out of it. A single scenario switch drives Base, Upside and Downside.
Opening base plus new, less churned, rolled forward monthly. Churn applies to the beginning balance.
Average active customers × blended ARPU, held at the June actual level and flexed by scenario.
Variable COGS as a percentage of revenue; fixed support, payroll and program spend carried at plan and flexed for discretionary items.
EBITDA less capex, interest and the change in working capital, rolled onto the opening balance.
Figure 4 Monthly cash balance for FY2026: actual through June, Base case forecast thereafter. Cash falls below the $1.0M minimum policy in August and ends the year at $656.7K, a $343.3K shortfall against policy.
05 · Conclusion
Recommendation to the CFO
- The revenue miss is a retention problem. Churn at 3.08% against a 2.50% plan is running 23% above budget and accounts for the bulk of the 55-customer shortfall. Acquisition is only 5.8% behind plan year to date and pricing is within 1.2% of target. Fixing churn is worth more than fixing either.
- Operating expense discipline cannot close the gap. Favorable R&D and sales & marketing variances of $35.4K year to date are almost entirely offset by unfavorable COGS and G&A of $35.7K. The $240.4K EBITDA miss is a gross profit problem and has to be solved on the revenue line.
- The hiring plan is not affordable as approved. Base case cash breaches the $1.0M policy floor in August and ends the year $343.3K below it. The plan needs to change before then, not after.
- Three actions. Redirect budgeted headcount toward retention and customer success; defer the remaining net hires until churn holds below 2.8% for two consecutive months; and reprice or restructure the lowest-retaining customer tier, where ARPU is diluting toward $811 against an $820 plan.
- What would change this conclusion. The forecast holds ARPU and churn at June levels. If churn returns to plan in the second half the cash position materially improves, so the reforecast should be rerun monthly against actual churn rather than treated as settled.
The full workbook: assumptions, 24 months of history, budget, actuals, the rolling forecast and the variance analysis.