Budget Variance
The difference between budgeted and actual spend, expressed as a percentage
What is Budget Variance?
Budget variance is the percentage difference between actual spend and the budgeted amount. It shows how closely spending followed the plan.
Small variances mean good planning and control, and large ones point to problems or changes that need explanation.
How this KPI is measured
- Function
- Finance
- Sub-function
- Budgeting & Forecasting
- Industry
- All Industries
- Type
- Lagging
- Impact
- Financial control
- Unit
- %
- Measurement frequency
- Monthly / Quarterly
- Formula
- ((Actual spend − Budgeted spend) / Budgeted spend) × 100
How to calculate it
Subtract budgeted spend from actual spend, divide by budgeted spend, and multiply by 100.
For example, if actual spend was 1,080,000 against a budget of 1,000,000, the variance is +8%.
A positive result means overspend and a negative one means underspend. Investigate the causes, whether timing, price, volume or genuine change.
Where it is used
Controlling spending
Spot overspends early.
Improving budgeting
Learn from repeated variances.
Reporting to management
Explain differences.
How to improve it
Tips and common mistakes
- Underspend can be as much a problem as overspend.
- Separate timing differences from real ones.
- Set materiality thresholds.
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