FP&A
What Is Variance Analysis?
Variance analysis compares what you planned to spend or earn against what actually happened. A positive revenue variance means you beat plan. A negative cost variance means you overspent. For ecommerce operators the most valuable variances to track are gross margin, paid CAC, and fulfillment cost per order.
Variance Analysis compares actual results to forecast (or budget), line by line, with written commentary explaining each meaningful difference. It's the monthly close discipline that separates real FP&A from bookkeeping.
Standard format
| Line | Forecast | Actual | Variance $ | Variance % | Reason |
|---|---|---|---|---|---|
| Revenue | $1.4M | $1.51M | +$110K | +7.9% | Meta campaign overperformed |
| COGS (Cost of Goods Sold) | $520K | $580K | +$60K | +11.5% | FX moved -3% on Q1 PO |
| Marketing | $280K | $340K | +$60K | +21.4% | Pulled forward Q2 Meta spend |
Variance threshold
Investigate any line variance over 5% OR over a materiality dollar threshold ($25K is common for mid-stage brands). Below the threshold, document but don't investigate. Above, explain. Recurring patterns become forecasting-assumption changes.
Cadence
Monthly at close (P&L variance). Weekly on the 13-week cash flow (cash receipts/outflows variance). Quarterly at board level (rolled-up commentary).
The most common mistake
Treating variance as a finance-only exercise. The variance memo should be reviewed with the operators responsible for each line, marketing variance with the CMO, fulfilment variance with ops, payroll with HR. The pattern recognition is what produces operating decisions.
Frequently Asked Questions
what is variance analysis?
Actuals minus forecast/budget with written commentary.
what's a meaningful variance?
Over 5% or over materiality threshold ($25K typically).
variance vs budget vs vs forecast?
Budget = annual plan. Forecast = most recent re-forecast. Track both.
Related Terms
- Budget vs forecast vs actuals
- What is a rolling forecast?
- What is a reforecast?
- What is 13-week cash flow?
Browse the full ecommerce finance glossary for every metric and money term a DTC operator needs.
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