What is a variance report?

A variance report is a document that compares the actual performance of a company with its budgeted or planned performance. It identifies and explains the differences or variances between the two, and assesses the impact of these differences on the company's financial results.

Variance reports are commonly used by organizations to track their financial performance and to assess the effectiveness of their budgeting and forecasting processes. They can help management to identify areas of improvement, make informed decisions, and take corrective actions if necessary.

Key components of a typical variance report include:

1. Actual results: This section highlights the actual financial performance of the company, including revenue, expenses, and other key metrics.

2. Budgeted/planned results: This section outlines the budgeted or planned financial performance of the company, based on forecasts and projections.

3. Variances: This section calculates and explains the differences between the actual and budgeted results. Variances can be categorized as favorable (when actual results are better than expected) or unfavorable (when actual results are worse than expected).

4. Analysis: This section provides an analysis of the variances, identifying the reasons behind the differences and assessing the impact on the company's overall financial performance.

Overall, variance reports play a crucial role in helping organizations to monitor and evaluate their financial performance, make informed decisions, and drive continuous improvement.