Cost Control
You know which way the sign runs and what a negative variance is actually telling you.
**Variance is Budget minus Forecast**, and the column says which way that runs: *negative = over budget*.
| Variance | Meaning | | ------------ | -------------------------------------- | | **Negative** | forecast exceeds budget — heading over | | **Zero** | forecast matches budget | | **Positive** | forecast is under budget — headroom |
The sign catches people out because the instinct is that a bigger number is worse. Here the bigger number is better: variance counts *down* into overspend.
Variance compares the budget against your **forecast** — not against what has been paid.
That is the whole value of it. Comparing budget to paid tells you about the past, and always looks fine until it suddenly does not. Comparing budget to forecast tells you where the production is heading, months before the invoices arrive.
It also means variance is exactly as good as the forecast behind it. An account whose forecast has not been touched since the set was created shows a variance of zero and is telling you nothing at all.
Budgeting has a **Variance** column too, and it is a different comparison: a budget row against its **baseline** — how the plan has changed from the approved original.
| Module | Variance compares | Answers | | ---------------- | ---------------------------------- | -------------------------- | | **Budgeting** | current total against its baseline | how has the plan changed? | | **Cost control** | budget against forecast | are we going to overspend? |
Same word, two questions. If someone quotes a variance figure, it is worth knowing which they mean.
Read it as a question, not a verdict. Three things produce it:
1. **The account really will overspend** — the useful case, found early. 2. **The forecast is stale in the other direction** — someone raised it for a risk that has since gone away. 3. **Cost is misfiled** — an item on the wrong account makes one negative and another positive. The category totals show this shape immediately — see [move cost items to another account](/kb/article/move-cost-items-to-another-account).
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