The variances and their cause are written up in what is traditionally called a variance report. Overspending is an adverse variance and underspending is a positive variance. You will prepare a variance report for your manager, who will then review it and forward it to the next level of management.
As you look at the spreadsheet, determine those variances that are most critical to your operation’s plans. Also, identify those that are controllable or most likely to recur. These should be the focus of your variance report.
In selecting the variances you will examine, don’t focus solely on large discrepancies. Smaller ones may hide insights into operational issues that could save money or increase revenue once changes are made.
There is no specific rule about how variance reports should be laid out. Their format reflects your company’s budgeting practices and your department’s function. So a report done in one company’s marketing department might look very different from one prepared in another organization’s customer service department. But all variance reports have one thing in common: they use the original budget and the assumptions that were its basis as the means of explaining discrepancies between the set budget and real one. You will want to indicate not only the difference in dollars but also the percentage difference between budget and actual costs or income. Depending on the budget, you may also want to compare the current year’s variances against those from last year.