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budget-variance-analysis

Produce a structured budget variance analysis from actual vs budget figures. Use when asked to analyse budget variances, explain underspend or overspend, write a variance commentary, or investigate why actuals differ from plan. Produces a categorised variance table with root cause analysis and management commentary.

한국어 요약은 준비 중입니다. 원문 설명을 표시하고 있습니다.

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Budget Variance Analysis Skill

Produces a complete variance analysis from numbers through to root cause explanation and management commentary.

Required Inputs

  • Actuals and budget figures (paste as table or describe line by line)
  • Period (month / quarter / YTD)
  • Materiality threshold (e.g. £10k or 5%)
  • Known reasons for variances (if any)
  • Audience (CFO / board / management / auditor)

Output Structure

1. Variance Summary Table

Line ItemBudgetActualVariance £Variance %F/A
Revenue
Cost of Sales
Gross Profit
Opex
EBITDA

F = Favourable | A = Adverse

2. Material Variance Commentary

For each variance above threshold:

[Line item] — £[amount] F/A ([%])

  • Root cause: [Specific explanation — not "timing" without detail]
  • Permanent or timing? Will this reverse next period?
  • Management action: What is being done
  • Forecast impact: Does this change full-year outlook?

3. Top 3 Variances Requiring Attention

Ranked by materiality and strategic significance.

4. Forecast Revision

Does the full-year forecast need updating? State revised expectation and key assumptions.

5. Executive Summary

3-4 sentences of management commentary suitable for a board pack.

Quality Checks

  • All variances above threshold explained
  • Root causes specific (not vague)
  • Favourable/Adverse correctly labelled
  • Forecast impact stated for material variances

Anti-Patterns

  • Do not explain a variance as "timing" without specifying which period it will reverse into and what amount is expected
  • Do not label a favourable variance on a cost line without checking whether it is due to underspend, delayed spend, or reduced activity — the cause determines whether it is genuinely good news
  • Do not omit variances below the materiality threshold entirely — note them collectively so the reader knows they exist and were reviewed
  • Do not present a variance analysis without a forecast impact statement for material items — historical variances without forward implications are incomplete

Example Trigger Phrases

  • "Write a variance analysis for these actuals vs budget: [paste]"
  • "Explain why we are over budget on [cost line]"
  • "Write the variance commentary for our finance review"
  • "Produce a budget vs actual analysis for Q[N]"

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