Budget vs Actual Analysis
What is budget vs actual analysis?
Budget vs actual analysis compares what a firm planned to earn and spend with what it actually earned and spent, and explains the differences, called variances. It shows where results beat or missed the plan and why.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that delivers actuals that are reconciled and on time, so each variance reflects real performance.
How to run it
- Compare each budget line with the actual result for the month and year to date
- Flag variances above a threshold you set in advance
- Investigate causes and decide what to change, see budget-to-actual analysis for the deeper review process
The figures below are illustrative. Budgeted revenue was $100,000 and actual revenue was $92,000, a shortfall of $8,000. The firm investigates whether it came from fewer projects or lower rates.
Why it matters for service firms
Budget comparisons turn accounting data into decisions. Firms that review them monthly catch problems such as slow billing or rising costs while there is still time to respond.
Frequently asked questions
What is a variance?
A variance is the difference between the budgeted amount and the actual amount. A favorable variance means revenue was higher or costs were lower than planned, and an unfavorable variance means the opposite.
How often should the comparison be reviewed?
Monthly, soon after the close, with a deeper quarterly review that updates the forecast. Prompt reviews let you correct course while results can still be changed.
Related terms and guides: budget-to-actual analysis, budget variance analysis, rolling forecast, profit and loss statement, and month-end close.