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Glossary
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Budget variance analysis

What is budget variance analysis?

Budget variance analysis is a financial process where the actual budgeted amount is compared to the projected budget. The purpose is to find any discrepancies, or "variances," to help improve financial control and decision-making.

A variance can either be favorable or unfavorable. A favorable variance occurs when the actual income is higher than the budgeted income, or actual expenses are less than budgeted. An unfavorable variance is the opposite. Variance analysis is an important tool to help a company understand its operational performance and to identify areas that need attention.

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