What does a variance report help management to do?

A variance report serves as a valuable tool for management by identifying deviations from the budget. This report compares actual financial performance against the budgeted figures, highlighting any discrepancies—whether expenses were higher than expected or revenue was lower than planned. By analyzing these variances, management can gain insights into operational performance, assess the effectiveness of current strategies, and make informed decisions on necessary adjustments to improve future financial outcomes. This process is critical for maintaining financial control and ensuring that the organization stays on track to meet its financial goals.

Understanding variances allows management to take corrective actions, such as reallocating resources, adjusting spending, or revising financial forecasts. Thus, the role of the variance report is integral to effective financial management and budget adherence. It focuses on internal performance rather than establishing new categories, developing software, or exclusively communicating with external stakeholders.