Planning & reporting
Budget vs actual
Budget vs actual compares what happened in a period with what was planned, line by line, to show where the business is ahead of or behind its plan.
Variance = Actual − Budget (and Variance % = Variance ÷ Budget)
Worked example
| Revenue | actual $520,000, budget $500,000 → +$20,000 (favorable) |
| Payroll | actual $210,000, budget $190,000 → +$20,000 (unfavorable) |
The same +$20,000 is good news on revenue and bad news on a cost line.
Why it matters
A budget only earns its keep if it is checked. Variance analysis turns the plan into an early warning: which lines are drifting, by how much, and since when.
Common mistakes
Where it misleads
Reading every positive variance as good: on cost lines, over budget is unfavorable.
Comparing a part-month of actuals with a full month of budget.
Rebuilding the comparison by hand each month, so it arrives too late to act on.
Related terms
Keep reading
- Gross marginGross margin is the share of revenue left after paying the direct costs of delivering what you sold.
- EBITDAEBITDA is earnings before interest, taxes, depreciation and amortization: a measure of operating profit before financing, tax and non-cash charges.
- Cash burn and runwayNet burn is how much more cash a business spends than it takes in each month; runway is how many months its cash would last at that rate.
Stop calculating it by hand.
Dear CFO keeps your statements, forecasts and metrics current from the systems you already run.