| name | budget-vs-actual |
| description | Monthly and quarterly budget vs. actual variance analysis for businesses. Compare planned vs. realized revenue, expenses, and margins. Identify favorable/unfavorable variances, root-cause material variances (greater than 5% or greater than $X threshold), produce management commentary, and generate actionable reforecast recommendations. Outputs: variance table, waterfall narrative, and updated rolling forecast. Use when a CFO, controller, or analyst needs to close the books for a period, explain results to management or investors, or update the annual operating plan mid-year. NOT for: building budgets from scratch (use startup-financial-model), tax preparation, transactional bookkeeping, or real-time cash tracking. |
Budget vs. Actual Variance Analysis Skill
Perform rigorous period-end budget vs. actual analysis. This skill guides Sam Ledger through pulling actuals, comparing against budget, calculating variances, identifying root causes, drafting management commentary, and producing a reforecast update.
When to Use This Skill
Trigger phrases:
- "Run budget vs. actual for [month/quarter]"
- "Explain our variances this month"
- "Why did we miss/beat revenue?"
- "Prepare the management report for [period]"
- "Update the rolling forecast based on actuals"
- "Board needs BvA commentary"
- "What drove the EBITDA miss?"
- "Reforecast the rest of the year"
NOT for:
- Building the original budget — use
startup-financial-model
- Tax filings or tax provision work — use compliance workflows
- Real-time bookkeeping or transaction categorization — use
qbo-automation or expense-categorization
- Multi-entity consolidations with intercompany eliminations (requires dedicated consolidation tooling)
- Strategic planning or multi-year long-range planning (LRP)
Core Concepts
Variance Types
| Type | Formula | Meaning |
|---|
| Absolute Variance | Actual − Budget | Dollar difference |
| Percentage Variance | (Actual − Budget) / Budget × 100 | Magnitude relative to budget |
| Favorable (F) | Revenue: Actual > Budget / Expense: Actual < Budget | Better than plan |
| Unfavorable (U) | Revenue: Actual < Budget / Expense: Actual > Budget | Worse than plan |
Materiality Thresholds (Default — customize per engagement)
Revenue line items: ≥ $5,000 or ≥ 5% of budgeted line → investigate
Expense line items: ≥ $2,500 or ≥ 10% of budgeted line → investigate
Total EBITDA: ≥ $10,000 or ≥ 5% of budgeted EBITDA → board commentary required
YTD cumulative: Carry forward monthly variances; flag if YTD > full-year materiality
Variance Root Causes — Taxonomy
Revenue Variances:
- Volume variance: More/fewer units/customers than planned
- Price/rate variance: ASP or pricing differed from assumption
- Mix variance: Different product/segment mix than modeled
- Timing variance: Deal closed in wrong period (pulled forward or pushed out)
- New vs. existing: Over/under-performance in specific cohort
Expense Variances:
- Headcount timing: Hire later/earlier than budgeted
- Contractor/vendor: Over/under-spend vs. plan
- One-time items: Non-recurring expenses not in budget
- Volume-linked: COGS, sales commission scaled with revenue
- Pricing/inflation: Vendor price changes not modeled
Step-by-Step Workflow
Step 1: Collect Inputs
Required:
□ Period (Month, Quarter, YTD)
□ Budget/forecast file (CSV, Sheets, or typed data)
□ Actuals file or QBO export (same period, same account mapping)
□ Chart of Accounts mapping (if budget and actuals use different labels)
□ Materiality threshold (use defaults if not specified)
□ Audience (internal management, board, investors)
Optional:
□ Prior period actuals (for trend context)
□ Prior year same period (for YoY context)
□ Existing narrative from last period
Step 2: Normalize Data
Map actuals to budget line items. Standard P&L mapping:
Budget Label → QBO/Actuals Equivalent
-------------------------------------------------
Revenue → Total Income
COGS → Cost of Goods Sold / Direct Costs
Gross Profit → (calculated)
Sales & Marketing → Advertising, Sales Commissions, Marketing Expenses
R&D / Engineering → Contract Labor (tech), Software Tools
G&A → Payroll (admin), Legal, Accounting, Insurance
Total OpEx → (sum of above)
EBITDA → (Gross Profit − Total OpEx)
Step 3: Calculate Variances
For each line item:
for each line_item:
absolute_var = actual - budget
pct_var = (actual - budget) / abs(budget) * 100
if is_revenue_line:
favorable = actual > budget
else:
favorable = actual < budget
flag = abs(pct_var) >= threshold_pct or abs(absolute_var) >= threshold_dollar
Step 4: Build the Variance Table
Standard Output Format:
PERIOD: March 2026 | Budget vs. Actual
Line Item | Budget | Actual | $ Var | % Var | F/U | Flag
-------------------|-----------|-----------|-----------|--------|-----|------
REVENUE | | | | | |
Product Revenue | $120,000 | $108,500 | ($11,500) | -9.6% | U | ⚠️
Service Revenue | $30,000 | $34,200 | $4,200 | +14.0% | F | ⚠️
Total Revenue | $150,000 | $142,700 | ($7,300) | -4.9% | U |
| | | | | |
COGS | $45,000 | $43,100 | $1,900 | +4.2% | F |
Gross Profit | $105,000 | $99,600 | ($5,400) | -5.1% | U | ⚠️
Gross Margin % | 70.0% | 69.8% | -0.2pp | | |
| | | | | |
OPERATING EXPENSES | | | | | |
S&M | $25,000 | $27,400 | $2,400 | +9.6% | U | ⚠️
R&D | $20,000 | $18,500 | ($1,500) | -7.5% | F |
G&A | $15,000 | $16,200 | $1,200 | +8.0% | U |
Total OpEx | $60,000 | $62,100 | $2,100 | +3.5% | U |
| | | | | |
EBITDA | $45,000 | $37,500 | ($7,500) | -16.7% | U | 🚨
EBITDA Margin | 30.0% | 26.3% | -3.7pp | | |
Step 5: Root Cause Analysis
For each flagged variance, drill down:
Revenue miss example (Product Revenue -$11,500 / -9.6%):
Root cause analysis:
- Volume: Closed 8 deals vs. 10 budgeted = -2 deals
- Price: Avg deal size $13,563 vs. $12,000 budget → +$1,563 per deal (favorable mix)
- Net: 2 fewer deals × $12,000 ASP = -$24,000 volume miss
+ 8 deals × $1,563 price premium = +$12,500 price/mix offset
= ($11,500) net as reported ✓
Assessment: Volume issue, not pricing. Sales pipeline slipped — 2 deals moved to April.
S&M overrun example ($2,400 / +9.6% unfavorable):
Root cause analysis:
- Planned: $15k paid ads + $10k salaries
- Actual: $15k paid ads + $10k salaries + $2,400 conference registration (unbudgeted)
- Classification: One-time / non-recurring — will not repeat next month
Assessment: Benign. Budget for next year; no action required.
Step 6: Management Commentary
Draft in this structure for each material variance:
[LINE ITEM] — [VARIANCE DIRECTION] by $[AMOUNT] ([PERCENT]%)
WHAT: [What the number shows in plain English]
WHY: [Root cause — specific, not generic]
ACTION: [What we're doing about it, or why no action needed]
OUTLOOK: [Impact on full-year forecast]
Example commentary:
EBITDA — Unfavorable $7,500 (-16.7%)
WHAT: March EBITDA of $37,500 missed the $45,000 budget by $7,500, driven by a revenue shortfall partially offset by lower R&D spend.
WHY: Product revenue missed by $11,500 due to 2 enterprise deals slipping to April (pipeline confirmed, not lost). S&M ran $2,400 over budget on a one-time conference registration. R&D came in $1,500 favorable as one contractor engagement started late.
ACTION: The 2 slipped deals are expected to close in April (both in final contract stage). Conference registration expensed — not recurring. R&D contractor now onboarded; expect full burn starting April.
OUTLOOK: Revising Q2 forecast to front-load the 2 slipped deals. Full-year EBITDA forecast unchanged at $540,000.
Step 7: Update Rolling Forecast
After analyzing actuals, update the remainder of the year:
Reforecast logic:
1. Lock actuals for closed periods (do not re-budget history)
2. Roll forward: identify permanent vs. timing variances
- Timing: shift to next period (deal slippage, late hire)
- Permanent: adjust full-year assumption (market softness, new run rate)
3. Update full-year totals:
- YTD actuals + remaining budget (adjusted)
- Recalculate runway/cash if applicable
4. Flag changes from last forecast:
- Revenue: +/- $X vs. prior forecast
- EBITDA: +/- $X vs. prior forecast
- Cash EOY: +/- $X vs. prior forecast
Reforecast summary table:
| Original | Prior | Current | Change
| Budget | Forecast | Forecast | (vs Prior)
-------------------|-----------|-----------|-----------|----------
Full-Year Revenue | $1,800,000| $1,750,000| $1,762,000| +$12,000
Full-Year EBITDA | $540,000 | $510,000 | $512,500 | +$2,500
Year-End Cash | $850,000 | $790,000 | $793,000 | +$3,000
Output Formats
1. Management Report (Narrative + Table)
Full commentary with variance table, root causes, and reforecast. For CFO/CEO/Board use.
2. Quick BvA Flash (1 Page)
Three sections only:
- Headline KPIs: Revenue, Gross Margin, EBITDA, Cash (actual vs budget, one line each)
- Top 3 variances with one-sentence explanations
- Reforecast change vs. prior
3. Structured JSON (for downstream processing)
{
"period": "2026-03",
"period_type": "month",
"generated_at": "2026-04-02",
"summary": {
"total_revenue_budget": 150000,
"total_revenue_actual": 142700,
"total_revenue_variance_abs": -7300,
"total_revenue_variance_pct": -4.87,
"ebitda_budget": 45000,
"ebitda_actual": 37500,
"ebitda_variance_abs": -7500,
"ebitda_variance_pct": -16.67
},
"line_items": [
{
"name": "Product Revenue",
QBO Integration Workflow
When actuals come from QuickBooks Online (via qbo-automation):
1. Export: QBO → Reports → Profit & Loss (select period, compare to prior)
2. Or via API: GET /v3/company/{id}/reports/ProfitAndLoss?start_date=&end_date=&summarize_column_by=Month
3. Map QBO account names to budget line items using COA mapping table
4. Validate totals: QBO Revenue total must match sum of line items (catch mapping errors)
5. Feed into variance calculation above
Common QBO mapping pitfalls:
- QBO may break out subcategories that are lumped in budget → aggregate up
- Owner draws in QBO are not an expense → exclude from P&L analysis
- Payroll taxes may be in separate QBO accounts → roll up to loaded headcount cost
Handling Common Edge Cases
Budget is $0 for a line item that has actuals
Never divide by zero. Instead:
variance_pct = "N/A (no budget)"
Flag as material if actual > materiality dollar threshold
Commentary: "Unbudgeted spend of $X in [account]"
Prior period restatements
If actuals from a prior period changed:
Flag the restatement explicitly
Show: prior reported → restated → delta
Update YTD accordingly
Note audit trail in commentary
Multiple departments / cost centers
Run variance analysis at:
1. Consolidated company level (always)
2. Department level (if cost center tracking exists)
Highlight cross-departmental offsets where applicable
(e.g., R&D under-spend masked by G&A over-spend at total level)
Seasonal businesses
Include YoY comparison alongside BvA:
March 2026 Actual vs. March 2026 Budget (primary)
March 2026 Actual vs. March 2025 Actual (context)
Flag: is variance seasonal (expected) or structural (new issue)?
Metrics Glossary
| Term | Definition |
|---|
| BvA | Budget vs. Actual |
| F | Favorable (better than plan) |
| U | Unfavorable (worse than plan) |
| pp | Percentage points (for margin comparisons) |
| YTD | Year-to-date (cumulative from Jan 1) |
| QTD | Quarter-to-date |
| MTD | Month-to-date |
| Reforecast | Updated projection for remainder of year, based on actuals to date |
| Flash | Quick preliminary BvA before full close (estimates OK) |
| Hard close | Final, locked actuals (no further adjustments) |
| Soft close | Preliminary actuals, subject to accruals and adjustments |
Integration Points
qbo-automation — Pull actuals directly from QuickBooks Onlinestartup-financial-model — Original budget/forecast data sourcekpi-alert-system — Trigger alerts when variance thresholds are breachedreport-generator — Format BvA output into board-ready PDF or deckfinancial-analysis-agent — Deep-dive trend analysis when root cause isn't obvious
Example Intake Prompt
"March is closed. Budget had us at $150k revenue and $45k EBITDA. Actuals came in at $142k revenue and $37.5k EBITDA. Product was $11.5k short — two enterprise deals slipped. Service came in $4.2k over. S&M ran $2.4k over on a conference. R&D was $1.5k under — contractor started late. Draft the BvA table, root cause summary, and board commentary. Flag reforecast impact."
Sam will:
- Build the variance table with F/U flags and materiality indicators
- Write root-cause summaries for all flagged lines
- Draft management commentary in WHAT/WHY/ACTION/OUTLOOK format
- Produce the reforecast delta (timing vs. structural adjustments)
- Output structured JSON if downstream processing is needed
