Budget Variance Calculator
Put your budget next to your actuals, line by line. See which lines beat the plan, which missed it, and which gaps are big enough to explain at month-end.
Mark each line as revenue or expense so the favourable or unfavourable label comes out right.
A line is flagged only when its variance beats both thresholds, so small lines with big percentages do not clutter the review.
| Line | Variance | F/U |
|---|
Your inputs stay in your browser. Nothing is stored.
How to calculate budget variance
Budget variance is actual minus budget for each line. Divide by the budget to get a percentage. Then decide whether it helped or hurt profit, which depends on whether the line is revenue or a cost.
The approved figure for the line and period. Take it from the board-approved annual operating plan, split by month, or the latest reforecast if that is what you report against.
Example: marketing budget for Q2 = ₹80 lakhWhat was booked for the same line and period. Pull it from the trial balance or P&L after month-end accruals, so timing gaps do not show up as variances.
Example: marketing spend booked in Q2 = ₹1.02 croreRevenue lines are favourable when actual is above budget. Expense lines are favourable when actual is below budget. Use the P&L grouping of the account.
Example: ₹22 lakh over on marketing = unfavourableSelling more than planned is good news, so a positive variance is favourable (F) and a shortfall is unfavourable (U).
Actual above budget = FSpending more than planned reduces profit, so a positive variance is unfavourable and an underspend is favourable.
Actual above budget = URevenue variance minus expense variance. It equals the gap between actual and budgeted profit for the lines you entered.
(Rev actual − Rev budget) − (Exp actual − Exp budget)| Product sales: 12.90 Cr vs 12.00 Cr | +₹90 L F |
| Service revenue: 2.55 Cr vs 3.00 Cr | −₹45 L U |
| Raw materials: 6.48 Cr vs 6.00 Cr | +₹48 L U |
| Employee costs: 2.42 Cr vs 2.50 Cr | −₹8 L F |
| Marketing: 1.02 Cr vs 80 L | +₹22 L U |
| Net variance | −₹17 L U |
- Revenue: actual 15.45 Cr against budget 15.00 Cr, so revenue is ₹45 lakh favourable
- Expenses: actual 9.92 Cr against budget 9.30 Cr, so costs are ₹62 lakh unfavourable
- Net: ₹45 lakh minus ₹62 lakh leaves profit ₹17 lakh below budget, about 3% of the planned 5.70 Cr
- Materiality at 10% and ₹10 lakh flags service revenue (15%) and marketing (27.5%). Raw materials is 8%, below the % line
Static vs flexible budget variance
A static budget compares actuals with the original plan, whatever happened to volume. A flexible budget first resets the plan to the volume you actually achieved, so you can tell a volume effect from real overspending.
| Item | Value | How it is worked out |
|---|---|---|
| Planned units | 1,00,000 | From the original budget |
| Actual units | 1,10,000 | Sales were 10% above plan |
| Static budget, materials | ₹6.00 Cr | 1,00,000 units x ₹600 standard |
| Flexible budget, materials | ₹6.60 Cr | 1,10,000 units x ₹600 standard |
| Actual materials | ₹6.48 Cr | From the ledger |
| Static budget variance | ₹48 L U | 6.48 Cr minus 6.00 Cr, looks like overspending |
| Flexible budget variance | ₹12 L F | 6.48 Cr minus 6.60 Cr, materials were used efficiently |
| Volume (activity) variance | ₹60 L U | 6.60 Cr minus 6.00 Cr, caused by selling more units |
Use the flexible view for variable costs such as materials, freight and commissions. Fixed costs like rent stay the same in both.
Get a one-page report with every line, its variance, F or U, and the material items flagged.
How to explain and reduce budget variances
Finance teams lose most of the variance review to chasing small numbers and rebuilding the same spreadsheet. A few habits keep it focused.
Set a % and an amount threshold with your CFO. Explain only lines that beat both, and note the rest as within tolerance.
Missing accruals and late invoices create fake variances. Run the comparison after month-end entries are posted.
For variable costs, flex the budget to actual volume before blaming a cost centre for overspending.
A campaign that moved from May to June is a timing variance. Tag it so it does not get explained twice.
Owner, cause, timing or permanent, and action. A flux analysis report template keeps every line explained the same way.
Run the same steps every month so nothing is missed. Our flux analysis checklist covers thresholds, sign-offs and follow-ups.
Frequently asked questions
Subtract the budget from the actual figure for the same line and period. Divide that by the budget and multiply by 100 for the percentage. For example, marketing spend of ₹1.02 crore against a budget of ₹80 lakh is a ₹22 lakh variance, or 27.5%.
A favourable variance is one that improves profit compared with the plan. That means revenue above budget or expenses below budget. An unfavourable variance is the opposite: revenue below budget or expenses above it.
No. With the formula actual minus budget, a positive number is good on a revenue line and bad on an expense line. That is why the calculator asks for the type of each line. Also, a favourable variance can hide problems, such as savings from delayed hiring.
There is no single rule. Many finance teams use a percentage threshold such as 5% or 10% combined with an amount threshold that suits their size. A variance is investigated only when it beats both, so a 40% gap on a tiny line does not take up review time.
A static budget variance compares actuals with the original budget. A flexible budget variance compares actuals with the budget adjusted to the actual level of activity. The difference between the two is the volume variance, which shows how much of the gap came from selling more or fewer units.
You cannot, because you would be dividing by zero. Report the amount only and explain the line as unbudgeted. This calculator shows the percentage as n/a and checks such lines against the amount threshold alone.
Related finance calculators
Enter your business email to download your results.
- Every line with variance, % and F or U
- Material lines flagged, ready for your CFO
- Instant download, no waiting