Budget vs Actual Analysis
Comparing planned spending and revenue against actual results to identify variances and their causes.
Budget vs actual (BvA) analysis compares what was budgeted for a period against what actually occurred, calculating variances (differences) and investigating their causes. It's the primary financial control mechanism for most businesses.
Variances are classified as favourable (actual revenue exceeds budget, or actual costs are below budget) or unfavourable (the opposite). Significant variances — typically defined as exceeding 5-10% or a set dollar threshold — require explanation.
Effective BvA analysis goes beyond identifying that a variance exists. It categorises variances as volume-driven (sold more or fewer units), price-driven (prices changed), mix-driven (different product mix than planned), or timing-driven (revenue or costs shifted between periods).
Regular BvA review — monthly at minimum — enables management to take corrective action while there's still time. A variance discovered in December that started in March represents nine months of lost opportunity. Many companies now use rolling forecasts alongside traditional budgets to maintain forward-looking visibility.
Related Terms
A financial report summarising revenue, costs, and profit over a specific period.
The process of finalising all financial transactions for a month and producing accurate financial statements.
The regular financial and operational reports prepared for a company's board of directors.
Further Reading
A practical guide to the financial KPIs that give CFOs real-time visibility into business health across global operations.
Feeling overwhelmed by business finances? This practical guide helps business owners build genuine financial control — without becoming a finance expert.