# How to do a budget vs actual report

List each budget line beside its actual for the period. Variance is actual minus budget. Show it in dollars and as a percentage, mark each as favourable or unfavourable, then write one line on why for the big ones.

Free tool: [Budget vs actual variance report generator](https://www.pulsify.tech/free-tools/budget-vs-actual-variance-report-generator/). Enter budget and actual figures to get dollar and percentage variances.

## Why it matters

A budget only helps when you compare it with what happened. The report shows where money is going off track while you can still act.

A short commentary on big variances turns numbers into decisions.

## The steps

1. **Get the budget.** Use the approved budget for the same period and same account groups as the actuals.
2. **Run actuals.** Run the profit and loss for the period from your ledger. Use the same basis, cash or accruals.
3. **Set the layout.** Show budget, actual, dollar variance and percentage variance for each line.
4. **Work out the variance.** Variance = actual minus budget. Percentage = variance / budget x 100.
5. **Mark favourable or unfavourable.** Higher income than budget is favourable. Higher cost than budget is unfavourable.
6. **Set a threshold.** Comment only on variances above, say, 10% and A$1,000.
7. **Explain the big ones.** Say why in one line, whether it is timing or permanent, and what you will do.
8. **Update the forecast.** If a variance is permanent, change the forecast for the rest of the year.

## Worked example

Example Distribution Pty Ltd reviews October.

| Line | Budget | Actual | Variance | % | Result |
| --- | --- | --- | --- | --- | --- |
| Sales | A$65,000 | A$60,000 | -A$5,000 | -7.7% | Unfavourable |
| Cost of sales | A$32,500 | A$30,000 | -A$2,500 | -7.7% | Favourable |
| Wages | A$12,000 | A$12,000 | A$0 | 0.0% | On budget |
| Freight | A$2,000 | A$2,900 | A$900 | 45.0% | Unfavourable |

Sales are 7.7% below budget, and cost of sales fell by the same percentage because volume was lower. Freight is 45% over, so the team checks rate rises and surcharges.

## Common mistakes

- Comparing different bases or periods.
- Commenting on every line.
- Treating every variance as bad.
- Not changing the forecast.

## Common questions

### How do I show variance as a percentage?

Divide the variance by the budget and multiply by 100.

### What is a good threshold?

Many teams use 10% and a minimum dollar amount. Pick what suits your size.

### How often should I run it?

Monthly, as part of the close.

## Next step

Use the [Budget vs actual variance report generator](https://www.pulsify.tech/free-tools/budget-vs-actual-variance-report-generator/) first. Then see [faster month-end close with Pulsify](https://www.pulsify.tech/solutions/faster-close/).

Source: https://www.pulsify.tech/how-to/do-a-budget-vs-actual-report/ (last checked 2026-10-20)