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Definition · FP&A

Variance analysis

Variance analysis is comparing actual results against budget, forecast, or prior period and explaining the drivers behind each gap. For variance analysis, the useful boundary is the driver, assumption, source data, owner, time period, scenario logic, and decision the model is meant to support.

Also known as budget variance analysis, BvA analysis, variance reporting

Written by Pluvo TeamReviewed by Pluvo Team
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Why it matters

Understanding variance analysis matters because planning only improves decisions when assumptions, drivers, owners, and time periods are explicit enough to revisit when actuals arrive. Pluvo traces a variance through the chain reaction across your systems to the change that caused it, so you see the driver behind the gap, not just what moved.

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In practice

  • Planning example

    Teams use variance analysis when a forecast, budget, or scenario needs an assumption that can be revisited. The finance team should know the driver, source data, owner, and period before using it in a model.

  • Pluvo example

    Pluvo traces a variance through the chain reaction across your systems to the change that caused it, so you see the driver behind the gap, not just what moved.

In practice, teams should define variance analysis with a clear source, owner, time period, and decision before they use it in reporting, planning, or operating reviews.

Understanding variance analysis matters because planning only improves decisions when assumptions, drivers, owners, and time periods are explicit enough to revisit when actuals arrive. Pluvo traces a variance through the chain reaction across your systems to the change that caused it, so you see the driver behind the gap, not just what moved.

A strong workflow for variance analysis separates the definition from the action: first agree what the term means, then decide how it is measured, when it changes, and who is accountable for the next step.

Pluvo traces a variance through the chain reaction across your systems to the change that caused it, so you see the driver behind the gap, not just what moved.

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FAQ

What is the difference between variance analysis and flux analysis?

The boundary for variance analysis differs from related terms by scope, source data, time period, and decision use. In this glossary, it covers comparing actual results against budget, forecast, or prior period and explaining the drivers behind each gap, so teams should compare those boundaries before using it in reporting or planning.

How do you calculate a budget variance?

To calculate variance analysis, define the source data, time period, comparison basis, and owner before applying the formula. The useful answer is not only the math; it is whether the inputs and timing match the decision the metric supports.

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Sources

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