
What do you mean by negative budget variance?



Budget variance is the difference between expenses and revenue in your financial budget and the actual costs. When revenue is higher than the budget or the actual expenses are less than the budget, this is considered a favorable variance. A negative variance means results fell short of budget, and either revenue was lower than expected or expenses were higher than expected.
A budget is prepared using assumptions about the business environment the company will be operating in over the course of the year. If the assumptions are wrong, chances are that actual results will vary from the budget. Inaccurate budgets, be they derived from an abundance of optimism or a lack of data, lead to unrealistic expectations and frequent inaccuracies. Frequent and severe budget variances are an indicator that a budget audit and re-estimation is required.