Variance Analysis
The process of comparing planned or budgeted financial figures against actual results to identify and understand discrepancies.
The variance view highlights where actuals diverged from budget, with severity ratings and drill-down capability.
What is Variance Analysis?
Variance analysis compares what you expected to spend or earn against what actually happened. The difference — the variance — tells you where your plans diverged from reality.
A favorable variance means you spent less or earned more than planned. An unfavorable variance means the opposite. The goal isn't to eliminate variance (that's impossible) but to understand it, learn from it, and improve future plans.
Variance analysis can be applied to budgets (budget vs actual), forecasts (forecast vs actual), and revenue projections.
Why it matters
Without variance analysis, budgets are just documents that get filed and forgotten. Variance analysis closes the loop — it forces you to look at what actually happened and ask why.
For startups, the most valuable variance analysis is usually around payroll (did we hire when planned?), tool spend (did costs creep?), and revenue (did deals close as expected?). Each variance is a signal about how well you understand your own business.
Formula
Variance = Actual - Budget (or Planned) Variance % = (Actual - Budget) / Budget × 100
Example
You budgeted $8,000/month for SaaS tools. Actual spend was $11,200. Variance = $3,200 unfavorable (40% over budget). Drilling down, you find a new analytics tool added mid-month and an annual renewal you forgot to budget for.
How RunwayCal helps
RunwayCal has a full variance engine with budget-vs-actual tracking, severity ratings (green/yellow/red), founder notes on each variance, drill-down to individual transactions, and forecast-vs-actual accuracy scoring for revenue models.
Common mistakes
- 1Treating all variances as problems — some favorable variances (like lower spend) may indicate underinvestment
- 2Analyzing variance only at the total level instead of drilling into categories
- 3Not documenting why variances occurred, making it impossible to improve future budgets
See exactly where plans met reality — and where they didn't
RunwayCal's variance engine shows budget vs actual by category, with severity ratings, drill-down, and founder notes.
Track budget variance → Start free