Budget vs Actual Analysis
A budget is a financial plan; comparing it with actual results head-by-head — variance analysis — tells management where the business is drifting and by how much. It is the core of budgetary control in companies, NGOs, hospitals, schools and even household finance.
Formulas
- Variance = Actual − Budget
- Variance % = Variance ÷ Budget × 100
- For an expense head, actual above budget is adverse (unfavourable); below budget is favourable.
- For an income head, actual below budget is adverse; above budget is favourable.
How this tool works
Enter each head, mark it as Expense or Income, and type the budget and actual amounts. Variance, variance % and a status label are computed per row; variances beyond ±10% are flagged with a warning mark. The summary shows total budgeted and actual expense, utilisation %, income comparison, net surplus and the list of heads needing attention, with a grouped bar chart of budget vs actual.
Worked example
Marketing budget ₹80,000, actual ₹1,12,000 → variance +₹32,000 (+40%), adverse, flagged. Repairs budget ₹40,000, actual ₹28,500 → variance −₹11,500 (−28.8%), favourable. Sales revenue budget ₹25,00,000, actual ₹23,80,000 → variance −₹1,20,000 (−4.8%), adverse but within the 10% band. Total expense budget ₹21,50,000 vs actual ₹21,63,000 → utilisation 100.6%.
Setting a realistic budget
Base next year's budget on this year's actuals adjusted for known changes — inflation on rent and salaries, planned headcount, new marketing campaigns — rather than on the old budget. Review quarterly and re-forecast the remaining months so the comparison stays meaningful.
Interpreting variances
Not every favourable variance is good news — under-spending on maintenance or training may create future costs. Investigate large adverse variances for price effects (paid more per unit) versus volume effects (used more units). Where activity levels differ from plan, prepare a flexible budget scaled to the actual volume before judging performance.
Frequently Asked Questions
What is an adverse variance?
A variance that reduces profit compared to the budget: higher-than-budget expense or lower-than-budget income.
Why is the 10% threshold used?
It is a common management-by-exception cut-off. Adjust your own attention level based on the size of the head.
Can I track monthly budgets?
Yes. Add rows per head per month (for example "Rent — Apr") or keep one register per month and export each to Excel.
What is budget utilisation?
Actual expense ÷ budgeted expense × 100. Above 100% means overspending overall.
Disclaimer: This tool is for general information and estimation only. Tax rates and rules change — verify with official sources or a professional before acting. Read full disclaimer.