Revenue variance is the difference between the revenue you budget, or expect to earn within a specific period, and the revenue your business actually earns within the same period. Many businesses use a static budget to create projections of expected revenue and expenses. A static budget helps businesses stay on track with sales and expense goals, and is used as a planning tool for operations. Static budgets may be created monthly, quarterly and annually. After each period, static budget variances are calculated to determine the difference between the static budget and actual results.
Reference your original static budget figures and note the revenue you expected to earn during the period. If your static budget includes revenue by unit and price, note values for both categories. This will help plan future budgets. For example, if you sell more units at a lower price, you may actually earn more revenue than selling less units at a higher price or vice versa.
Reference your actual revenue for the same period. Note units sold and the price per unit earned.
Calculate your variance. Subtract your total estimated revenue from your actual revenue. If the figure is positive, you have exceeded your static budget expectations. If the number is negative, you have not met your expected revenue budget. When calculating your revenue variance, it is not always necessary to include units sold in your calculation; however, if your actual figures vary greatly, you may want to analyze the difference between the static budget and actual units sold data.
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.