Budget vs. Actual Explained: Definitions, Variances and Calculations
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Last Updated:
Category: Marketing Budget & KPI
Authors: Shusaku Yosa
Budget versus actual compares an approved plan with recorded results. A budget is the planned amount; actuals are results confirmed under an agreed reporting policy. A positive variance is not automatically favorable: revenue and expenses need different interpretations.
Using the convention in this guide, variance = actual − budget, variance rate = (actual − budget) / budget, and attainment or utilization = actual / budget. Match period, scope, currency, tax and recognition rules first.
Revenue and expense examples
Item | Budget | Actual | Variance | Variance rate | Attainment / utilization |
|---|---|---|---|---|---|
Revenue | JPY10m | JPY9m | −JPY1m | −10% | 90% revenue attainment |
Included expenses | JPY5m | JPY5.5m | +JPY0.5m | +10% | 110% expense utilization |
In this fictional example, revenue is below plan and expenses exceed plan. Revenue less the included expenses is JPY3.5 million against a JPY5 million plan. It is not necessarily the company's final profit, because that depends on the full expense scope.
Understand each calculation
Measure | What it shows | Limitation |
|---|---|---|
Absolute variance | Monetary difference | Does not adjust for budget scale |
Variance rate | Difference relative to budget | Undefined for a zero budget |
Revenue attainment | Progress toward the revenue target | Excludes margin deterioration |
Expense utilization | Share of planned spending used | Does not establish outcome or efficiency |
Spending 100% of a budget means the money was used as planned. It does not mean the objective was achieved. Spending 80% may reflect efficiency, delayed work or missing costs.
Handle zero and unknown values
With a zero budget and JPY20,000 actual cost, the absolute variance is +JPY20,000. The percentage is undefined because the denominator is zero. Display a blank or “not defined,” rather than treating it as a normal 0% or infinite attainment result.
An invoice that has not arrived also does not establish zero cost. Record the unresolved item, owner and expected finalization date. Mark a report containing estimates as preliminary and distinguish it from confirmed actuals.
Investigate price, quantity, timing and scope
Observation | Possible causes | Evidence to check |
|---|---|---|
Expense over budget | Higher unit price, more activity or expanded scope | Statements, orders and approvals |
Expense below budget | Efficiency, missing work or unrecorded cost | Delivery status and outstanding items |
Revenue below target | Volume, price, timing or customer mix | Product and customer detail |
Revenue up but contribution down | Discounts or higher delivery/support cost | Margin and expense scope |
Confirm the explanation with records and the responsible owner rather than inferring it from the number alone.
Keep forecasts separate
An annual budget of JPY12 million, three months of JPY2.7 million actuals and JPY9 million forecast remaining cost produce a JPY11.7 million outlook. That outlook is neither fully realized actuals nor an automatically revised budget.
Preserve the original approved plan. If a budget amendment is authorized, retain a revised version and its approval history. A basic tracking table can contain item, month, budget, actual, variance, cause, action, owner and due date. Calculate aggregate percentages from aggregate amounts rather than averaging row-level rates. The first-close guide shows how to apply these definitions.
Related practical guides
Keep budgets and execution connected
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