Breakdown
How it works
Variance = actual − budget. For revenue and profit lines a positive variance is favourable; for cost lines it is adverse. Express it as a percentage of budget, and explain material variances by splitting price/rate from volume/mix effects. YTD variance smooths monthly phasing noise.
Formula
Worked example
Revenue budget 1.25m, actual 1.18m: −70k (−5.6%) adverse; vs prior year 1.1m: +80k (+7.3%).
Frequently asked questions
What variance threshold needs commentary?
Common policy: anything over ±5% and ±50k (scaled to the entity), or any variance that changes the full-year outlook.
How do I present favourable/adverse?
Use F/A or brackets consistently, never raw signs — a negative cost variance confuses readers. State the driver, the one-off vs run-rate split, and the full-year impact.
Flexed budget?
For cost centres, compare actual with a budget flexed to actual volume; the difference between original and flexed budget is the volume variance.