Finance · Budgeting · Component
The variance record
Actual against budget, with the reason rather than only the number — because the number alone prompts explanation rather than learning.
The deliverable
What it is
A variance says the world differed from the assumption. Whether that is a failure depends entirely on which of the two was wrong.
Timing variances and permanent variances behave completely differently and are frequently reported identically, which makes the report harder to act on than it needs to be.
One level in
What it is made of
Each element is a constituent part of the component. Follow one to see the attributes it carries.
The variance
The difference between actual and budget, per line and period.
3 attributes: Variance · Variance rate · Cumulative or period
LearnThe cause
Which assumption failed, or which event was not assumed at all.
3 attributes: Assumption · Cause type · Reason
LearnThe response
What is being done, including deciding to do nothing.
3 attributes: Action · Owner · Permanence
Learn
Separate timing variances from permanent ones. Reported together, both become harder to act on.
The other components in budgeting
The budget
The allocation itself — money against lines, with the assumptions that produced each figure.
LearnThe strategy check
Where the money moved compared with last period, and whether that matches what the organisation says its priorities are.
Learn