Budget Variance
Also called: budget vs actual variance
What is Budget Variance?
Budget variance is the difference between a budgeted figure and the actual result for the same line and period. A favourable variance improves profit; an adverse one reduces it.
Why Budget Variance matters
A budget nobody compares against is a wish. Variance analysis is what turns it into a management tool, by pointing at the specific lines that moved rather than at the total.
Budget Variance formula
Variance = Actual − Budget
Variance % = variance ÷ budget × 100, which makes small and large lines comparable.
How Budget Variance works in practice
Review variances monthly, largest first by value, and separate volume effects from rate effects. Sales being 10% below budget is a different problem from costs being 10% above it.
Frequently asked questions
Monthly for variances, with a re-forecast quarterly if the assumptions have genuinely changed.