Budget vs. actual compares the business’s results with its adopted plan for the same period and on the same basis. Variance analysis explains the differences and identifies the decision or follow-through they require.
Compare like with like
Use the same company scope, currency, accounting definitions and dates. Compare September with September and January–September with January–September. A trailing-twelve-month result answers a different question from nine months of budget.
Income and cash-flow amounts cover a period. A balance sheet shows the position on a date. Compare September 30 cash with planned September 30 cash; do not add monthly ending cash balances to make a year-to-date amount.
The maintained model’s role reviews use actual minus budget. A positive difference means more than planned, which may be favorable for revenue and unfavorable for cost. Interpret the business result before assigning a status color.
In a hypothetical month, $110,000 of revenue against a $100,000 budget produces a $10,000 positive variance, or 10% of budget. With a zero or negative comparison base, show the dollar difference and explain the result rather than presenting a misleading percentage.
Percentage points and percentage change
Percentage points measure the difference between two percentages. Percentage change measures the difference relative to the comparison amount. A gross margin of 35% against 37% is 2 percentage points below plan. Relative to 37%, that is about a 5.4% decline: (35 − 37) ÷ 37. State which measure you mean so a margin change is not mistaken for a change in sales or profit dollars.
Actuals, monthly close, YTD and TTM
Actuals are recorded results for completed periods on the stated accounting basis, rather than budget or forecast amounts. Identify preliminary or revised results so the reader knows what has been reviewed.
Monthly close is the process of completing and reconciling the period’s accounting records and reviewing its financial reports. It is a process, not simply exporting the statements. Use the existing monthly-update instructions for the company’s actual close work.
Year to date (YTD) covers the start of the financial year through the stated cutoff. January through September is nine months of YTD activity for a calendar-year business. A different fiscal year has a different start.
Trailing twelve months (TTM) covers twelve consecutive completed months ending at the cutoff. October 2025 through September 2026 is a TTM period. It crosses a calendar year and is different from January–September 2026 YTD. Use the same twelve months if comparing it with budget; do not substitute a nine-month budget total. Balance-sheet amounts remain positions on dates, not twelve-month totals.
Explain the cause before choosing the response
Ask what changed, what evidence explains it and what needs to happen next. A revenue shortfall could reflect timing, lost customers, price or an unsupported original assumption. A cash shortfall could reflect collections, investment, debt repayment or distributions. The same variance can require very different responses.
Separate a supported explanation from a hypothesis. Record the missing evidence, responsible person and next check in the existing review. A favorable month also deserves explanation if it depends on timing that will reverse.
Preserve the plan you are measuring against
The adopted budget remains the comparison. A forecast updates the outlook using current evidence. Revising the outlook should not quietly erase the original commitment or its variance. A formally revised budget needs its own approval, date and preserved predecessor.
The monthly owner-and-CEO meeting considers the integrated company result after the functional reviews. Keep the dated financial view in The Numbers and the resulting decisions in The Rhythm.
Put the idea to work
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