What does "budget variance" describe?

Budget variance specifically refers to the difference between the budgeted figures and the actual figures that are recorded during a certain period. This variance allows organizations to analyze how well they adhered to their financial plans and identify areas where performance did not meet expectations. Understanding budget variances is crucial for managers and accountants as it provides insights into financial performance, helps in making informed future budgets, and allows for adjustments in operations or spending. This analysis gives a clearer picture of financial health and aids in strategic decision-making, as it highlights discrepancies and enables corrective actions where necessary.