Revenue Variance
What is revenue variance?
Revenue variance is the difference between actual and budgeted revenue. The analysis breaks that gap into causes, such as more or fewer hours, higher or lower rates, and a different mix of work.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that delivers reconciled actuals and budgets on the same basis, so variances reflect real performance.
How to break it down
- Compare actual revenue with the budget for the same period
- Separate the volume effect from the rate effect
- Review the mix of services and clients, see budget vs actual analysis
A worked example
The figures below are illustrative. A firm budgets 100 hours at $150, or $15,000. It bills 90 hours at $160, or $14,400. The variance is minus $600. Fewer hours reduced revenue by $1,500, and higher rates added $900.
Common mistakes
- Looking only at the total variance
- Comparing actuals with a budget built on a different basis
- Not asking why the volume or rate changed
Why it matters for service firms
A total variance says that something changed, not why. Splitting it into volume, rate, and mix shows whether to fix sales, delivery, or pricing.
Frequently asked questions
What is the difference between volume and rate variance?
Volume variance comes from doing more or fewer hours or projects than planned. Rate variance comes from charging more or less per hour or project than planned. The two can offset each other.
How often should revenue variance be reviewed?
Monthly, with the management reports, and again at the end of each quarter when the forecast is updated. Prompt review gives time to act.
Related terms and guides: budget vs actual analysis, comparative income analysis, billing rate, realization rate, and rolling forecast.