# Budget vs Actual: How to find & analyze variances

Understanding and managing your money is important in both business and personal life. One useful tool for this is the Budget vs Actual analysis. In this guide, we’ll explain what Budget vs Actual for businesses is, how to calculate budget differences, the different types of budget differences, what to do when your plans and actual results don’t match up, reports that go well with budgets, and we’ll even give you a free Budget vs Actual template from Sheetgo. Plus, we’ll keep it simple and give you practical advice without using confusing words.

## What is budget vs actual?

Budget vs Actual is a straightforward financial analysis method that helps you compare what you planned (budget) with what actually happened (actuals). It’s a useful tool for businesses to make smart decisions based on real financial performance.

## How to calculate budget variance?

Start by getting your budgeted and actual figures organized in a simple spreadsheet.

Step 2: Use the Variance Formula

Calculate the variance by subtracting your actual figures from the budgeted ones (Budgeted Amount – Actual Amount). This simple math gives you a clear picture of the financial difference.

Step 3: Understand Positive and Negative Variances

Determine if the variance is positive (good) or negative (not so good). Positive means you did better than expected, while negative indicates a shortfall. Knowing these differences is crucial for making smart decisions.

## What are the types of budget variance?

Budget variances can be grouped into three types:

Favorable (Good News) Variance:

Occurs when actual revenues are higher than budgeted or actual expenses are lower than budgeted.

Unfavorable (Not-So-Good )Variance:

Happens when actual revenues fall short of budgeted amounts or actual expenses exceed the budgeted figures.

Revenue Variance:

This focuses on the differences between what you expected to earn and what you actually earned.

## What do you do when your budget and actuals don’t line up?

Fixing differences between your budget and actuals involves:

• Taking a close look: Examine each item to find out where the difference is coming from.
• Adjusting future plans: Use what you learn to make your future budgets more accurate.
• Implement controls: To prevent significant variances in the future, implement better financial controls and monitoring systems.

Example: If marketing expenses exceed the budget, delve into specific campaigns, evaluating their success and any unforeseen costs contributing to the variance. Adjust future budgets to accommodate the successful campaign’s impact. Strengthen controls in the marketing department by setting spending limits, requiring pre-approval for large expenses, and enhancing transparency in financial processes. This proactive approach not only resolves immediate issues but also fortifies your financial framework against potential variances in the future.

## Reports that complement budgets vs actuals

Boost the power of your budget vs actual analysis with these extra reports:

## Free budget vs actual template from Sheetgo

To make budgeting easier, Sheetgo offers a free Budget vs Actual template. It’s simple to use, making it accessible for everyone. Install the free template, and customize it to fit your financial needs.

Q: Why is budget vs actual analysis important?
A: It helps you see how well you’re doing financially and makes it easier to decide what to do next.

Q: How often should I do budget vs actual analysis?
A: It’s a good idea to check every month or every few months, depending on how often you want to keep an eye on things.

Q: Can I use budget vs actual analysis for my personal finances?
A: Absolutely! You can apply the same ideas to manage your personal finances and see where your money is going.

In summary, understanding and analyzing the differences between your budget and actual results is crucial for managing your finances effectively. This blog post has given you practical insights, whether you’re new to spreadsheets or have some experience. Use this knowledge to make informed financial decisions and find success in your financial endeavors.