What it includes
Thirteen pages: the short answer, the eight steps each on a page of its own with a worked example, the formula and the decision it leads to, a variance page rebuilt for a board pack, and the ten formulas on one page.
Tools and templatesFramework
Variance Analysis Framework
What changed, why it matters and what to do about it. Eight steps from budget against actual to a decision the board can take, worked through one month at an illustrative company, with ten formulas.
Who it is for
Finance directors, financial controllers and FP&A leads of businesses with roughly €1m to €50m revenue, and the advisers and fractional finance directors who prepare their packs.
How to use it
Agree the threshold with the board first, then work the steps in order each month on a ledger export and a budget by line. Every figure on the variance page should add up to the one above it.
How do you explain a budget variance to the board?
Explain only the lines over a threshold agreed in advance. Flex the budget to the units sold before judging costs. Split each gap into price, volume, mix, rate and usage, in euro, so every figure has an owner. Then sort each cause by whether it reverses, repeats or will not happen again, say what the lasting ones do to the forecast, and finish with the decision.
1. Decide what is worth explaining
A threshold agreed before the month, so the pack explains the lines that matter and no others.
Larger of €10k or 5% of the line's budget, plus every one-off: four of twelve lines.
2. Flex the budget before judging costs
Redraw the budget for the units actually sold, so lower costs from lower sales are not read as savings.
Cost of sales €55.8k under budget; €54.7k of it was selling less, €1.1k a real saving.
3. Split revenue into price and volume
Line by line, in euro, so each figure has an owner.
Revenue €78.0k short: volume −€96.0k, price +€18.0k.
4. Explain the margin: price, mix and cost
Three figures that add up to the change in gross margin.
38.0% to 38.4%: price +€11.2k, mix −€4.9k, cost +€1.1k.
5. Split costs into rate and usage
More of something, or a higher price for it: different fixes.
Payroll −€18.3k, all usage: two contractors kept on past September.
6. Sort each cause: timing, one-off or lasting
Only the lasting causes change the year, so they get the board's time.
€33.6k comes back in November; €11.5k a month stays.
7. Say what it does to the forecast
The next quarter as things stand, and with the actions the page asks for.
The quarter lands on budget only because a slipped order returns; €34.5k short underneath.
8. Write the note the board can act on
Four sentences, each with a figure: what happened, why, what it means, what to decide.
Release the contractors at 30 November and hire two engineers for January: +€38.8k on the quarter.
Ten formulas, each with a worked example
Worked in this order, every figure adds up to the one above it: lines to revenue, revenue and margin to gross profit, gross profit and overheads to operating profit. Positive is better than budget and negative is worse, for revenue and costs alike.
- Materiality threshold
- The larger of €10k or 5% of the line's budget
- Company A, October. Plus every one-off, anything that moves the forecast and anything near a covenant.
- Flexed budget
- Actual units × budgeted price, and × budgeted cost a unit
- Company A, October. For costs that move with volume. Fixed costs stay at budget.
- Volume variance
- (Actual units − budgeted units) × budgeted price
- Company A, October. Precision parts: (3,620 − 4,030) × €200 = −€82.0k.
- Price variance
- (Actual price − budgeted price) × actual units
- Company A, October. Precision parts: (€204.97 − €200.00) × 3,620 = +€18.0k.
- Margin from price
- Price variance × (1 − budgeted average margin)
- Company A, October. €18.0k × 62% = +€11.2k.
- Mix variance
- Σ change in units × (unit margin − budgeted average margin × unit price)
- Company A, October. Across three lines: −€4.9k.
- Cost variance
- Flexed cost of sales − actual cost of sales
- Company A, October. €1,134.5k − €1,133.4k = +€1.1k.
- Usage variance
- (Actual quantity − budgeted quantity) × budgeted rate
- Company A, October. Payroll: two contractor months × €9.15k = −€18.3k.
- Rate variance
- (Actual rate − budgeted rate) × actual quantity
- Company A, October. Payroll: none this month.
- Run rate
- The sum of the lasting causes, each month
- Company A, October. +€18.0k − €18.3k − €11.2k = −€11.5k a month.
This framework is the work done by hand. Stratavor does it from your ledger.
Every step in the framework is arithmetic on a ledger and a budget. Stratavor is the strategic intelligence platform that does that arithmetic every month, for the people who run the business.
Your ledger and CRM
It reads your systems
Read-only connections to Xero, QuickBooks Online, Sage, NetSuite, Deltek Vantagepoint and HubSpot. Nothing is typed in.
It finds what moved, and why
Every movement against budget and last year is computed in code from the ledger and traced to the customer, line or account behind it.
It writes the page
Each report opens with the answer and ends with what to decide, against the levels your board has set.
The page your board reads
7-day free trial. No credit card required.
Why did profit miss budget, and will it happen again?
Variance pageCompany A, October 2026
Profit came in €50.0k under budget; most of it returns in November, €11.5k a month does not
- Precision parts revenue−€64.0kAn order of 410 parts moved to November; price list up 2.5%. Timing and lasting.
- Spares and service revenue−€25.0k125 fewer jobs: two engineer roles vacant. Lasting.
- Payroll−€18.3kTwo contractors kept on past September. Lasting to 30 November.
- Professional fees−€9.5kLegal fee on a supplier contract. One-off.
To decide
Release the two contractors at 30 November and approve the recruitment fee for two service engineers to start in January: €38.8k on the quarter.
The variance page the framework builds for Company A. Illustrative figures. Company A is not a real company.
Use it with the rest of the pack
Board commentary template
The same rules across the whole pack: twelve paragraphs, each with a figure and a decision.
Board pack template
The pack Company A's figures come from, with the profit bridge this guide explains line by line.
KPI selection guide
Which measures belong in a board pack, and the levels to set before the year starts.
Frequently asked questions
What is variance analysis?
Variance analysis compares what happened with what was planned, usually actual results against budget, and explains the difference: how much of it came from price, volume, mix, cost rates or usage, whether it will reverse, repeat or not happen again, and what the board should do about it. Done well, it ends with a decision, not a list of differences.
How do you calculate price and volume variance?
Volume variance is the change in units at the budgeted price: (actual units − budgeted units) × budgeted price. Price variance is the change in price on the units actually sold: (actual price − budgeted price) × actual units. Worked line by line, the two add up to the revenue gap exactly. In the guide's example, 410 fewer precision parts at a budgeted €200 is −€82.0k of volume, and a 2.5% price rise on 3,620 parts is +€18.0k of price.
What is a flexed budget, and why use one?
A flexed budget is the budget redrawn for the units actually sold: actual units at budgeted prices and costs. Against the original budget, every cost that moves with volume looks good in a bad month and bad in a good one. Against the flexed budget, only real changes in cost are left. In the guide, cost of sales came in €55.8k under budget, and €54.7k of that was simply selling less.
What materiality threshold should a variance report use?
A common rule is the larger of a fixed amount and a percentage of the line's budget, for example €10k or 5%, set at about 5% of a month's budgeted profit. Add three rules: explain every one-off whatever its size, anything that changes the forecast and anything close to a banking covenant. Agree the threshold with the board before the year starts.
What is the difference between a timing variance and a lasting one?
A timing variance reverses: the sale or cost lands in another month, such as an order delivered in November instead of October. A one-off will not repeat. A lasting variance repeats every month until someone acts, such as an unfilled role or a price change. Only the lasting ones change the year, so they belong at the top of the variance note, with a figure for each month they run.
How do I explain a budget variance to the board?
In four sentences, each with a figure: what happened, why, what it means for the forecast, and what the board is asked to decide. Give the cause in euro, split into price, volume, mix, rate and usage, and say whether it will reverse, repeat or not happen again. "Volumes were down" describes; "one order of 410 parts moved to November" explains. In the guide's example, most of a €50.0k miss comes back the next month, and the board's time belongs on the €11.5k a month that does not.
How do I write variance commentary for management accounts?
Comment only on the lines over a threshold agreed in advance, such as the larger of €10k or 5% of the line's budget, plus every one-off. Flex the budget to the units sold before commenting on costs. For each line give the figure, the cause in euro, whether it lasts and what will be done: "Payroll €18.3k over: two contractors kept on past September, to be released at 30 November when the backlog clears" says more than "payroll was over budget due to staffing". If a sentence has no figure, it is not finished.
Is the guide the same as Stratavor?
No. The guide explains how to do variance analysis by hand. Stratavor is a strategic intelligence platform: it connects read-only to your accounting system and CRM, computes the movements in code from the ledger, traces each one to the customer, line or account behind it, and writes what changed, why it matters and what to decide. Every new account starts with a 7-day free trial.
Is the guide free?
Yes. Download the PDF and use it as you like; there is no sign-up.