Part Two
Toolbox
UNDERSTANDING VARIANCE
Variance just means difference. It might be the difference between budget and actual for the month or year, between actual this month and actual last month, and so on. It can be presented in dollars or percentages, or both. Percentages are usually more useful, because they provide a quick and easy basis of comparison between the two numbers.
The only difficulty with variance when you are reading a financial report lies in determining whether a variance is favorable or unfavorable. More revenue than expected, for instance, is favorable, while more expense than expected is unfavorable. Sometimes the folks in finance are helpful and let you know in a note that a variance enclosed in parentheses or a variance ...
Get Financial Intelligence, Revised Edition: A Manager's Guide to Knowing What the Numbers Really Mean now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
