What Is Budget vs. Actuals Variance Analysis?
Budget vs. Actuals Variance Analysis is a method to compare budgeted financial figures against actual financial performance within a certain period.
This analysis highlights discrepancies between what was planned financially and what was achieved—offering insights into financial management effectiveness, budget accuracy and areas of the business that require attention for future planning.
It’s crucial for assessing financial performance and enhancing strategic planning—so to help you, we created an easy-to-use Excel template.
How To Use Our Budget vs. Actuals Excel Template
Step One: Customize the Template
Adjust the template's appearance to match your preferences or organizational branding by changing colors, fonts and cell styles via 'Page Layout' and 'Home' tab options.
Step Two: Input Actuals Data
Clear any placeholder data on the Actuals section and input your real financial figures for the appropriate time period.
Step Three: Input Budget Data
Similarly, in the Budget/Plan section, replace placeholder values with your budgeted figures for each corresponding account.
Step Four: Calculate Variances
Use the designated area or columns in the template to calculate variances by subtracting Actuals from Budget figures to identify differences.
Step Five: Analyze Results
Examine the variance results to understand where you are over or under your budget, looking for significant discrepancies that may require action.
Step Six: Visualize Data
Utilize the template's charting tools or create your own charts and graphs to visually demonstrate the comparison between your budget and actual spending or revenue.
Budget vs. Actuals Formula
The formula to calculate the variance between your budgeted amounts and actual figures is straightforward:
Variance = Actual Amount - Budgeted Amount
Positive Variance (Favorable): Occurs when the actual amount is less than the budgeted amount for expenses or greater than the budgeted amount for revenues.
Negative Variance (Unfavorable): Occurs when the actual amount exceeds the budgeted amount for expenses or is less than the budgeted amount for revenues.
Different Types of Variance Analysis That Can Be Reviewed in a Budget vs Actuals Report
There are several types of variances that you can analyze in a budget vs actuals report, all of which will help you understand why financial performance deviates from the plan.
These are summarized in the table below:
|
Type of Variance |
Focus of Analysis |
|
Revenue Variance |
Analyze differences between actual and budgeted revenue to assess sales performance and market conditions. |
|
Expense Variance |
Examine differences in actual vs. budgeted expenses to identify cost overruns or savings. |
|
Profit Variance |
Evaluate deviations in profit to understand impacts on overall financial health. |
|
Volume Variance |
Investigate changes in the quantity sold or produced versus planned to assess market demand and production efficiency. |
|
Price Variance |
Analyze differences in actual vs. expected pricing to evaluate pricing strategy effectiveness. |
|
Cost Variance |
Focus on variations in costs such as materials, labor and overhead compared to standards. |
|
Efficiency Variance |
Measure resource use effectiveness against expectations to identify possible inefficiencies. |
|
Fixed and Variable Cost Variances |
Distinguish how fixed and variable costs vary from their expected amounts based on activity levels. |
|
Sales Mix Variance |
Analyze if the actual sales mix differs from the budgeted one and its effect on profitability. |
|
Flexible Budget Variance |
Compare actual results to an activity-adjusted budget, providing a clearer performance perspective relative to operations. |
