Financial Analyst how-to

How to Perform a Budget Variance Analysis

Variance analysis explains why results differ from plan.

Updated By the Career Education Institute Curriculum Team
Quick answer

Variance analysis explains why results differ from plan. In short: compare; calculate; focus, then complete the remaining steps below.

Step by step

  1. Compare actual results with budget by line.

  2. Calculate dollar and percent variances.

  3. Focus on the largest variances.

  4. Ask department owners for explanations.

  5. Separate timing differences from real changes.

  6. Summarize findings and actions.

Safety reminders for financial analysts

  • Protect confidential financial data
  • Use version control for models
  • Check formulas to prevent costly errors
  • Manage workload and screen time

Financial model · Forecast · Variance analysis · Income statement · Balance sheet · Cash flow statement: see the full financial analyst glossary.

More financial analyst how-to guides

Learn this in Financial Analyst trainingTake the practice test
Enroll in trainingTake fit quiz