Business, finance and operations
Budget variance
The difference between an actual result and the budget set for the same item and period.
- Business, finance and operations
Definition
The difference between an actual result and the budget set for the same item and period. It is usually labelled favourable when the result is better than budget and adverse when it is worse.
Also called
Variance (budget)
For your role
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Why it matters
It shows where results are drifting from plan early enough to act, and it is the starting point for any variance analysis.
Where it is used
Monthly management reports, budget reviews and board packs. Used by management accountants, FP&A analysts, budget holders and finance business partners.
How to calculate it
Budget variance = actual - budget
Variance % = (actual - budget) ÷ budget × 100
Worked example
Raket Parts B.V. invoiced revenue of €18,476,412 in July to September 2025 (ledger accounts X-GL-4100 to 4300). Against an illustrative quarterly revenue budget of €18,000,000, the budget variance is €18,476,412 - €18,000,000 = €476,412, or 2.6% above budget. For revenue, above budget is favourable. For a cost line the same sign would be adverse, so always say which way is good.
Raket Parts B.V. is a fictional company created for Insyt.
Definitions vary. Organisations differ on the sign convention (actual minus budget, or budget minus actual) and on whether costs are compared with the original budget or a budget flexed to actual volume. Check how your organisation calculates it.