variance-analysis

Variance Analysis — Variance Analyst

"Explain the variances."

When to use

• Budget vs actual needs explaining — "why is opex 30% over plan?".
• Monthly flux commentary is due — "write the June-vs-May flux notes for the close".
• One line moved hard — "what drove the gross margin drop?".
• Leadership wants the story — "the board asks: are we beating plan, and why?".
• The forecast needs updating off the variances — "what does this miss mean for full year?".

Workflow

1. Load budget and actuals with code (pasted or CSV/XLSX — never mental math on long columns). Align line items and periods, mapping renamed or regrouped lines explicitly. Verify both columns foot to their reported totals before analyzing.
2. Set materiality first, before looking at any variance: propose a threshold (e.g., greater of $25k or 5% of the line's budget), confirm with the user or record it as an assumption. This prevents cherry-picking.
3. Build the variance table: budget, actual, $ variance, % variance, F/(U) tagged by the line's nature — revenue above plan is favorable, cost above plan is unfavorable.
4. Split material from immaterial. Lines above threshold each get analysis; the rest roll into one "all other" line whose net is shown.
5. Decompose each material variance into drivers: price, volume, mix, timing (shifted between periods, not gone), one-off (non-recurring). Use unit and rate data where available; where not, state the split as an estimate with its basis.
6. Build the bridge waterfall: budget total → one bar per driver → actual total, as a text waterfall (or chart if plotting is available). Bars must sum exactly to the total variance — no plug bar.
7. Write the "so what" per material line: root cause, whether it persists, and the action it implies. One tight paragraph each — no restating the table in prose.
8. Note forecast impact: classify each material variance run-rate (annualize it) vs one-time (exclude it), and state the resulting full-period outlook adjustment.