Analyze budget variance

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The tasks below can only be performed by users assigned to the Admin or Budget Process Owner roles. For additional information on roles, see Frontdoor permissions and roles.

Note: The Variance Drivers feature is currently only accessible to Admin users and must be enabled. See Edit the Company Profile. The following instructions describe expected functionality when the Variance Drivers feature is made available to other user roles.

Effective variance analysis includes identifying drivers causing disparity between a specific forecast and its actuals. Identifying these drivers helps financial analysts interpret variances and provokes questions that assist in better managing company resources.

Financial analysts, including those assigned to Budget Process Owner or Cost Center Owner roles, can identify variance that meets a defined threshold, and then apply both a selected driver and a free-form explanation to that variance. Variance analysis requires loading actuals for forecast planning. See Budget planning and forecasting.

The Variance Drivers feature offers the following advantages over spreadsheets and other tools:

  • X-ray the entire budget. Analyze every Cost Center and account.
  • Use thresholds to focus on the variances that matter most.
  • Engage budget owners to investigate and explain variances.
  • Track the status of variance analysis from a birds-eye view.
  • Analyze variance drivers with powerful reporting.

Configure Variance Drivers

Complete the following tasks to enable the Dashboard and Variance Drivers feature, and populate the required reference data dimensions.

  1. On the Apptio planning menu, click the Settings button (), then click Company Profile.
  2. Select the Enable Dashboard and Variance Drivers checkbox.
  3. Click Save and Exit. Budget Process Owners and Admins can now see the Dashboard view, and all users can now access the Variance Analysis page.

  4. Define your Account Category dimensions to group your detailed general ledger accounts into a manageable list for variance analysis. See Manage Account Category reference data.

    Note: You will need to update your Account reference data with the new Account Category Code. You cannot use the account category name when loading into the Accounts reference data.
  5. Define your Variance Drivers' dimensions to create a configurable list of common variance drivers for your users. See Manage Variance Drivers reference data.
  6. Update your baseline plans with the new reference data dimensions. See Force a plan to use updated reference data.

Create and run a variance analysis

The Variance Drivers feature compares a new forecast plan to a baseline plan (either a budget or forecast) and flags all variances over the threshold you set. Cost Center Owners provide variance drivers for all flagged variances. Then, those Cost Center Owners (or other users assigned by the Admin) provide variance drivers and explanations for all identified variances.

Create the variance analysis

Variance drivers are used on forecasts in the New state.

  1. Open a forecast. See Open a plan or a forecast.

    Note: When using a forecast for variance analysis, you cannot start the forecast in the first month of your fiscal year.
  2. In the Plan sections menu, select All Plan Sections.
  3. On the Component menu, select Planning. See Navigate in Apptio planning applications..

  4. Select > Variance Analysis.

    Tip: If you see "Variance analysis has not been created for this Forecast plan," ensure the variance drivers' reference data has been correctly created and updated for the plan. See Manage Financial reference data.
  5. Enter your information in the Variance Analysis window. Options include:
    • Comparison Plan - Select a plan (like the finalized budget or previous forecast) to compare to the forecast for variance analysis. The comparison plan must be in the Final state. See Finalize a plan or forecast.
    • Variance Threshold - Enter both your financial and percentage values (both values are required for variance analysis). The Variance Drivers feature uses an Amount and Percentage approach to identifying variances. The financial value is an absolute value that applies to both favorable and unfavorable variance values.
    • Comparison Period - Select your time range for variance analysis. Only historical periods containing actuals can be analyzed.
    • Account Categories - All account categories are selected and cannot be changed.
  6. Select Create.

  7. On the Variance Analysis page, a red flag in the Drivers column indicates a variance is over the defined threshold. If a group is indicated, one or more items within that group are flagged:

  8. To adjust the thresholds (if, for example, too many or too few items are flagged), click Variance Analysis at the top of the page to repeat the process.

    Note: You will be warned that running variance analysis again will delete the prior variance analysis, and any explanations previously provided.
  9. All active plans in Open and New states will be available in the Compare To Plan dropdown when configuring variance analysis. However, the Cost Center Owners will not have access to view variance analysis when comparing to a plan in the New state.

    From 3.88 release, the "AND/OR" operation type is added in variance configurations to choose between:

    AND – Variance must meet both absolute value and percentage thresholds.

    OR – Variance must meet either the absolute value or percentage threshold.

Export Variance Commentary

This option allows you to export variance commentary as a .csv file directly from the Variance Ana-lysis report.

From the Options menu, select Export Variance Commentary option. The commentary is downloaded with details of all variance drivers. The exported data can be integrated into TBM Studio or other BI tools for deeper analysis and reporting.

Assign the variance drivers

Once you have created your variance analysis, you're ready to assign variance drivers, and provide an associated explanation for each. You can do this when a forecast is in the New or Open state (when it is available to all users).

  1. On the Component menu, select Planning. See Navigate in Apptio planning applications. > Variance Analysis.

  2. Select a single Cost Object and Account Category with a flagged variance and click the flag to open the Variance Breakdown window:

  3. This screen provides reporting tools to discover variance drivers and includes the following:
    • Summary tab - Drill in to get detailed information about the variance driver.
    • Actuals tab - View a table of actuals by month, as well as the details of the spend causing the variance.

    Variance drivers are displayed on the left side of the page. One or more variance drivers and optional details explaining their variance amount are displayed. Once an entire variance has been explained, the flag turns green.

Tip: Click the Close (X) button on the upper-right corner of the screen to close the variance explanations window.

Open the plan

Click Open Plan at the top of the page to open the plan and allow users access to the forecast plan and Variance Analysis pages.

Review the results

To display a summary view of variance drivers, navigate to Planning > Dashboard. On the Dashboard, the IT Spend Variances section displays a rollup of the variance analysis by driver and provides the option to save the variance analysis drivers information to a .csv file.

On the Dashboard, click a group (block) in the tree map chart to view the variance drivers for a single department.

Note: When comparing to Forecast Periods, Admin users can select "Update Variance Analysis" to refresh variance calculations, ensuring variance amounts reflect the latest forecast updates. This option is available in the "..." menu on the Variance Analysis page.

Enhancement in Planning 3.64 release

Prior to this release, when the user configured the variance threshold, and the expense was present either in the Actuals or the Budget, the variance was not flagged in the variance analysis report

However, from 3.64 release, the variance should be flagged if the expenses are beyond the configured threshold in both the following scenarios:

  • The expense is present in the Actuals but absent in the Budget.
  • The expense is absent in the Actuals but present in the Budget.

On selecting the variance driver, both the Summary Chart and Actuals tab will show relevant data for the user to enter the variance explanation.

Enhancement in Planning 3.68 release

Prior to this release, when the user configures the variance analysis with the plan that has different start year than the compared Actual period year, the variance comparisons were reported by aligning the comparison period from the start year of the comparison plan.

In the example below the variance is configured in FY2024 February Forecast plan, the comparison plan here is FY2023 Budget 2Yr with years 2023 – 2024. The comparison period in the variance analysis is Jan FY24.

The comparison amount reported in variance analysis for Apps – Back Office cost object is $1,813,375.

In the plan FY2023 Budget 2Yr, this value is coming from Jan FY23. That is due to alignment using plan start year.

But, it is now possible to align the comparison plan FY2023 Budget 2Yr by fiscal years. Select the Align by Matching Fiscal Year checkbox to align comparison plan by matching fiscal year. The info icon next to checkbox describes the expected behavior. To update variance analysis select the Replace the existing variance analysis with the new settings checkbox and then click the Update button.

Variance analysis gets updated with the comparison values from Jan FY24 period of the comparison plan.

You can also use option Align by Matching Fiscal Year during the new variance configuration as well.