Variance Reporting

A variance report is a document that compares planned financial outcomes with the actual financial outcome. In other words: a variance report compares what was supposed to happen with what happened. Usually, variance reports are used to analyze the difference between budgets and actual performance. The variance report is also called, “budget variance” or simply “variance,” depending on the financial outcomes you’re comparing. “Variance” is the difference between the budgeted/baseline goal and the actual reality. You can express variance as a percent or a dollar figure.

To write a variance report, you must complete the following steps:

1. Collect and organize the data you wish to analyze in a spreadsheet. This could mean: budget data for a given time period in one column vs. actual data from the same time period in another column.
2. Determine the variance in separate columns. You can choose to express variance as a financial figure and then again as a percent.
3. Explain the variance. You must explain what occurred to cause the variance, whether positive or negative. Best practices dictate that you should use unemotional language and be short and concise. Indicate the variance you’re speaking about. Then describe the cause of the variance. Finally, outline potential or actual effect on your organization. 

There are two indications of a favorable budget variance:

• Revenue is higher than the budget or,
• The expense is less than the budget.

Any result that puts funds back into the corporate wallet is a good variance.

On the contrary, an unfavorable budget variance is marked by a financial loss. Unfavorable budget variance signals that you used a poor baseline for measuring future results.

Variance reporting is used in: budgetary analysis, sales target analysis, trend reports, and spending analysis.

Improving budget variance begins when you’re establishing your budget targets. To establish realistic targets, you must have the ability to:

• Access past budgets
• View current performance data, including: expenses/costs, revenue, customer data, market data and historical trends
• Create accurate forecasts and construct models based on real-time and historical data
• Play out what-if scenarios
• Understand how finance affects operations and vice versa

CCH Tagetik supports variance reporting by providing a centralized source of financial and operational data, real-time reporting, automated variance analysis, and self-service analytics. Organizations can compare budgeted, forecasted, and actual results to identify performance gaps and understand the drivers behind financial outcomes.

Using the CCH Tagetik Analytic Information Hub, finance teams can perform variance analysis, create what-if scenarios, improve forecasting accuracy, and connect financial performance with operational drivers across the business.

Variance reporting improves business performance by helping organizations identify differences between planned and actual results, understand the causes of those differences, and take corrective action. By monitoring budget variances, revenue variances, and spending variances, organizations can improve decision-making, forecasting accuracy, and financial performance.

CCH Tagetik Financial Reporting solutions help finance teams analyze variances in real time, identify performance drivers, and turn financial and operational data into actionable insights.