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What is a Budget Variance?

 , updated on July 09, 2017
Budget variance is the difference between the budgeted amount and actual spend for a department, team, project or activity. It is often expressed as a percentage of the budget. For example, it is common to report spend is at 120% of budget, meaning that you have a 20% budget variance classified as an overspend. It is also possible for a budget variance to be an underspend such as a project that comes in at 50% of budget. Although this is favorable, it is viewed as a planning error that unnecessarily committed funds to a project that weren't needed. As such, it is common for the effectiveness of financial planning and control to be evaluated by variance whether positive or negative.
Overview: Budget Variance
TypeBusiness Metric
DefinitionThe difference between budgeted amount and actual spend often expressed as a percentage of budget.
ValueEvaluating financial planning and controls.
Related ConceptsReturn On Investment
Positive Risk
Payback Period

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