Variance analysis is the core of the monthly close review. Paste your budget and actual figures by line item to see dollar and percentage variances, favorable/unfavorable classification, and the net-income impact — with the items worth explaining flagged automatically.
How it works
Compare budget to actual by line item, classify each variance as favorable or unfavorable, and isolate the items that breach your investigation thresholds.
Variance $ = Actual − Budget
Variance % = Variance $ ÷ |Budget|
Revenue: favorable when Actual > Budget
Expense: favorable when Actual < Budget
Flag = |Variance %| ≥ threshold % AND |Variance $| ≥ threshold $Common uses
- Monthly and quarterly close variance commentary
- Department and cost-center budget reviews
- Board and lender reporting packages
Worked example
The calculator above opens with this example. Change any input to see the results update instantly, or select Reset to return to these figures.
| Line items | Net patient revenue | R | 4,850,000 | 4,712,300 Other operating revenue | R | 210,000 | 236,800 Salaries & wages | E | 2,140,000 | 2,198,450 Employee benefits | E | 535,000 | 521,900 Supplies | E | 690,000 | 742,600 Purchased services | E | 410,000 | 388,200 Utilities | E | 118,000 | 131,400 Depreciation | E | 265,000 | 265,000 |
| Investigate if variance ≥ | 5% |
| …and at least | $25,000 |
| Net income variance | ($200,450) |
| Revenue variance | ($110,900) |
| Expense variance | $89,550 |
| Items to investigate | 2 |
Largest unfavorable driver: Net patient revenue (($137,700) impact on net income). 2 of 8 line items exceed both thresholds (5.0% and $25,000).
Interpreting the results
- Use both a percentage and a dollar threshold so small accounts with large percentage swings, and large accounts with small percentages, are not over-flagged.
- Explain flagged items by root cause: volume, rate/price, timing, or one-time events.
- Timing variances that reverse next period should be documented but usually do not require corrective action.
Frequently asked questions
What makes a variance favorable or unfavorable?
A variance is favorable when it increases net income relative to plan: revenue above budget or an expense below budget. Revenue below budget or an expense above budget is unfavorable, regardless of whether the dollar difference is positive or negative.
What threshold should trigger a variance investigation?
Most finance teams combine a percentage threshold (commonly 5% to 10%) with a dollar floor scaled to materiality. Requiring both prevents small accounts with large percentage swings, and large accounts with small percentage moves, from crowding the review.
Can I paste data directly from Excel?
Yes. Copy four adjacent columns — line item, type (R or E), budget and actual — and paste them into the line-items box. Tab-separated values from Excel are recognized automatically, as are pipe-separated entries.
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