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Chapter 9
Reading Your Budget Variance — Before It Reads You
Finance called me out in a budget review and I had no idea why I was over.
22 min read
This is real
"Daniel is 13% over budget. The CFO asks why. He can't explain it. The room knows he hasn't been looking."
— Daniel, Supply Chain Manager
Key concepts
Concept 1
The 3 variance questions
Was it expected? Is it material? Is it recurring? Three questions, all the answers.
Concept 2
The 4-part explanation
What the variance is, what caused it, whether it's one-off or recurring, and what you're doing about it.
Concept 3
Early-warning system
Check spend at day 10 and day 20. If you're already at 70% by day 15, you'll be over.
Flashcard deck
Tap a card to flip.
Knowledge check
Q1
The three variance questions are:
Q2
If you're at 70% of budget by day 15:
Q3
A 4-part variance explanation includes:
Red flag alert
Mid-month, if you're already at 70% of monthly budget, you're tracking significantly over.
Questions to ask your finance team
- 1.Can you give me access to my cost centre in real-time, not just at month-end?
- 2.What is the materiality threshold for variances in our business?
- 3.What's the process for raising a reforecast request?