What is a variance analysis report?

A variance analysis report is a financial document that compares actual performance against budgeted or forecasted performance. It highlights discrepancies, or variances, between the two, helping organizations identify areas of overperformance or underperformance. The report typically breaks down variances into categories such as revenue, expenses, and profit margins, providing insights for better decision-making and strategic planning. Overall, it serves as a tool for assessing financial health and operational efficiency.