Glossary

Variance analysis

Variance analysis compares what actually happened against your budget or forecast — the routine that turns raw numbers into decisions and catches problems early.

2 min read

Actual vs budgetExplain the gap

Monthly disciplineEarly warning

Definition

Variance analysis compares actual results with the budget or forecast, quantifying and explaining each difference — favourable or adverse — across sales, costs and cash.

In plain terms

It is the "why is this different from what we planned?" review. A sales shortfall or cost overspend shows up here first, while there is still time to act.

Why it matters for your company

Regular variance analysis in your management accounts catches drift early and sharpens forecasting. Lenders value borrowers who track and explain performance. See preparing management accounts.