Variance analysis
A variance is the difference between what was planned and what happened. It is only useful when it comes with its cause.
Variance = Actual − Budget (on a cost, positive means adverse; on revenue, positive means favourable), then explain it: volume, price or mix
Why it matters
Knowing that profit is below plan is not enough to act. Knowing whether sales were fewer, prices lower or costs higher tells the owner what to change.
Where it appears in a CFO+ model
- In the comparison of the plan with the actual results as the business runs.
- In the drivers each activity asks for, which are the levers behind any variance.
Learn the concept in the Academy
Activities where it shows up
This concept belongs to a section that every CFO+ model asks, whatever the activity.
No figures are published: a definition and a formula only.