This variance formula template helps you find out the variance between actual and forecast financial figures.
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The variance formula is used to calculate the difference between a forecast and the actual result. The variance can be expressed as a percentage or an integer (dollar value or the number of units). Variance analysis and the variance formula play an important role in corporate financial planning and analysis (FP&A) to help evaluate results and make informed decisions for the business going forward.
There are two formulas to calculate variance:
Variance % = Actual / Forecast – 1 or Variance $ = Actual – Forecast
Variance in budgeting and forecasting
The variance formula is useful in budgeting and forecasting when analyzing results. The job of a financial analyst is to measure results, compare them to the budget/forecast, and explain what caused any difference.
In the Financial Planning & Analysis department of a company, the role of FP&A is to present management with accurate, timely, and insightful information so they can make effective decisions about the business going forward.
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