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What are the best practices for tracking and analyzing budget vs actual variances in Excel?

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If you are responsible for budgeting and forecasting, you know how important it is to track and analyze the differences between your planned and actual results. These variances can help you identify problems, opportunities, and trends that affect your business performance. But how can you do this effectively in Excel, the most widely used tool for financial analysis? In this article, we will share some of the best practices for creating, formatting, and interpreting a budget vs actual report in Excel.

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Vanessa Hauwa Enonche

Supply Finance Manager @ Diageo Great Britain Limited | Business Planning, Budget Management and Financial Efficiency
Vijay Yadav

Financial Controller at Saint-Gobain UK & Ireland
Godwin Siabukandu

Project Controls Manager

1 Set up your data

The first step is to organize your data in a clear and consistent way. You need to have two sets of data: one for your budget and one for your actuals. Ideally, they should have the same structure, categories, and time periods, so you can easily compare them. You can use separate worksheets, tables, or ranges to store your data, but make sure they have the same headers and labels. You can also use named ranges or dynamic arrays to make your formulas more readable and flexible.

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Vijay Yadav

Financial Controller at Saint-Gobain UK & Ireland
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In my experience the budget data is the easiest and can be populated once for the whole year. You then update the actual figures at the end of each period. It is also best to have the data by period and a cumulative figure to compare the YTD and period.

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2 Create a variance column

The next step is to calculate the difference between your budget and actual values for each category and time period. You can do this by creating a new column or range that subtracts the actuals from the budget. For example, if your budget is in column B and your actuals are in column C, you can use the formula =B2-C2 to get the variance for the first row. You can then copy this formula down to get the variance for all the rows. You can also use conditional formatting to highlight positive and negative variances with different colors.

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3 Add a variance percentage column

Another useful way to measure the performance of your budget is to calculate the variance percentage for each category and time period. This shows you how much your actuals deviate from your budget as a percentage of the budget. You can do this by creating another column or range that divides the variance by the budget and formats it as a percentage. For example, if your variance is in column D and your budget is in column B, you can use the formula =D2/B2 to get the variance percentage for the first row. You can then copy this formula down to get the variance percentage for all the rows. You can also use conditional formatting to highlight high and low variance percentages with different colors.

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4 Summarize your data

Once you have calculated the variance and variance percentage for each category and time period, you may want to summarize your data and see the big picture. You can do this by using pivot tables, charts, or formulas to aggregate and visualize your data. For example, you can use a pivot table to group your data by category, time period, or both, and show the total budget, actual, variance, and variance percentage for each group. You can also use a chart to plot your data and see the trends and patterns over time. You can also use formulas like SUM, AVERAGE, MIN, MAX, or COUNT to get some basic statistics about your data.

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5 Analyze your data

The final step is to interpret your data and draw insights from your budget vs actual report. You need to ask yourself some questions, such as: What are the main causes of the variances? Are they due to internal or external factors? Are they temporary or permanent? Are they favorable or unfavorable? How do they affect your goals and objectives? What actions can you take to improve your performance or adjust your budget? You can also use some techniques, such as variance analysis, trend analysis, or ratio analysis, to dig deeper into your data and find the root causes and implications of the variances.

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Carlos Ayala

FP&A | Data Analytics | BI | Technology and Services
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It′s have to do a drilldown to recognize the real vs the assumptions. We have to focus in details of the operation to understand a significat variations.

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6 Review and update your data

A budget vs actual report is not a one-time exercise. It is a continuous process that requires regular review and update. You need to monitor your data and compare it with your budget on a monthly, quarterly, or annual basis, depending on your needs and preferences. You also need to update your data and budget whenever there are significant changes in your business environment, such as new opportunities, challenges, or risks. By doing so, you can keep track of your progress and performance, and make informed decisions for your future.

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Godwin Siabukandu

Project Controls Manager
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The goal is to compare two or more sets of information in different dimensions. It can be budget versus actuals for the current period or a comparison against a previous period. The objective has to be clear and will dictate the data structure that is required to perform the comparison. As far as the technical method for the comparison, Excel offers a flexible spreasheet formula environment that most business users can follow simply. It also offers a pivot table environment where two tables or more sets of data can be combined, joined or connected to create a rich data model that can be pivoted in many dynamic ways that can answer questions. I find that investing time to set up the data model buys me so much utility in the analysis stage.

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Carlos Ayala

FP&A | Data Analytics | BI | Technology and Services
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It's so important the integrity and accuracy data. After data analysis is good to do a double check because it can be a data error or just referring to the business.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Vanessa Hauwa Enonche

Supply Finance Manager @ Diageo Great Britain Limited | Business Planning, Budget Management and Financial Efficiency
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Some of these stories could Include learnings applicable to the budget variances and capture actions to be taken to prevent future reoccurrence.

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Vijay Yadav

Financial Controller at Saint-Gobain UK & Ireland
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Another good presentation tip is to create a pivot table on a separate tab then on a separate tab create a graph to feed from the pivot table e.g. a bar chart by category with a budget and an actual bar. This is very easy to review and understand for finance and non-finance individuals. Advantage of pivot tables is that the data and the linked graph is automatically updated when refreshed once. You can also have more than one graph i.e. compare actual v budget for period, YTD and YTD v Annual budget.

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Ankit Khungar

A Tech-Savvy Finance Professional; supporting Decision making using Domain expertise ??, Visual Analytics ?? and Data Storytelling ??
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Though some points have been covered already, I'd like to share some useful tips/practices: 1. File prepration: Have seprate tabs for the summary and data. You may include the calculation on the Summary tab for the users to digest the information but don't over do. 2. Data setup: Be mindful that the templates might be shared with non-finance folks. Have clear labels and headlines ($'000 or # for numbers, etc). 3. Visual analytics : Use conditional formatting to highlight variance. Include it basis the threshold limit set for commentary. Use charts to summarise the performance. 4. Drill down: Show data set which is most important but do include other details that are grouped (columns or rows) to help drilling down and further analysis.

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What are the best practices for tracking and analyzing budget vs actual variances in Excel?

1

2

3

4

5

6

7

1 Set up your data

2 Create a variance column

3 Add a variance percentage column

4 Summarize your data

5 Analyze your data

6 Review and update your data

7 Here’s what else to consider

Budgeting & Forecasting

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What are the best practices for tracking and analyzing budget vs actual variances in Excel?

1

2

3

4

5

6

7

1 Set up your data

2 Create a variance column

3 Add a variance percentage column

4 Summarize your data

5 Analyze your data

6 Review and update your data

7 Here’s what else to consider

Budgeting & Forecasting

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