What is budget variance?
Budget variance is the difference between what you planned to spend (or earn) and what actually happened. A favourable variance means you spent less or earned more than expected. An adverse variance means the opposite. Tracking variance monthly is how you catch problems early instead of discovering them at year end.
How it works
You set a budget at the start of the year: how much you expect to earn and how much you plan to spend in each category (staff, rent, marketing, materials, and so on). Each month, you compare the budget to what actually happened. The difference is the variance.
For example, if you budgeted £2,000 for marketing in March and actually spent £2,800, you have an adverse variance of £800 on marketing. If revenue was budgeted at £30,000 and came in at £34,000, you have a favourable variance of £4,000 on revenue. Simple maths, but powerful when tracked consistently.
Why it matters
Without variance tracking, you have no way of knowing whether spending is under control until the year-end accounts arrive. By then it is too late to change anything. Monthly variance analysis catches overspending the week it happens, not six months later. It also highlights where the business is performing better than expected, which is just as useful for decision-making.
How CFO Pal tracks budget variance
CFO Pal lets you set annual or monthly budgets per category. It then pulls your actual figures from Xero, QuickBooks, or Sage and calculates the variance automatically. Each category is colour-coded: green for on track, amber for within 10% of budget, red for over budget. You see it at a glance every time you log in, and it is included in your monthly board pack PDF.
Budget tracking on autopilot
Set your budgets once. CFO Pal tracks variance automatically and alerts you the moment spending goes off track.
Connects to Xero, QuickBooks & Sage · UK data residency · No card required