Budget-to-actuals reporting compares budgeted amounts to actual amounts realized in the period

The key to budget-to-actual reporting is not only identifying where there are variances but also the cause of the variance, so that action can be taken to correct

Example: Electricity costs are 25% more than budgeted

Why did this happen?

What can we do to ensure this does not happen again next month?

Variance reporting is merely analysing the differences between to periods or actuals to budgets to identify what caused the differences. 

It is like peeling back an onion – you start at the highest level and keep going deeper the onion. 

You need to both identify the variance and then understand the reason for the variance

-Also need to analyze a lack of variances when they are expected

Need to also analyze a lack of variances when variances are expected

Example: Electricity costs are in line with budget, however production was 7% below budget

Why did this happen?

Did we make a mistake in our expense reporting?