Add some additional columns for good measure, spice it up with some color and you soon end up with an illegible mess like this:Ī much better way to display the variances is using plus-minus variance charts. In this most common example, you'd have the planned (or budget) values in one column, the actual values in another column, and the variance in the third column. The Classic Sales-vs-Plan or Costs-vs-Plan Report Here are three examples of variance reports: 1. Additionally, here's how to master variance visualization in Power BI if you'd rather do it there. Excel spreadsheets are still the most widely used tool for it, so we'll use them in our examples as well. There are a couple of different ways to perform variance analysis. However, a deeper look reveals that the higher costs are a direct consequence of significantly higher sales (favorable variance). Note: not all adverse variance is bad and not all favorable variance is good! For example, a variance analysis might show higher production costs than planned (adverse variance). An example of an adverse variance is when the actual revenue is lower than planned. Adverse variance (negative worse than planned)Īn example of a favorable variance is when actual total costs are lower than the planned total costs.Favorable variance (positive better than planned).Favorable and adverse varianceĪfter a variance is calculated, it falls into one of these two categories: ) and budgeted, planned or standard values. Variance is defined as the difference between the actual values (costs, revenue, head count. month, quarter, year) is over, managers, management accountants, controllers and other finance professionals calculate (and then analyze) a number of different types of variance. If this analysis is not performed afterwards, then setting budgets is useless. Managers use variance analysis to track the actual performance against these goals. The goal is to meet these budgets, but as with all goals - they are not always met. The starting point of these plans and budget are usually estimated cost and revenue figures. Most companies create plans and budgets to establish benchmarks for future performance in sales, production, operations, labor, etc.

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