Explain the variance, not just the number
A variance commentary should answer four questions: what changed, whether the cause is timing or structural, what evidence supports that view, and what you propose to do. This page walks through one fictional example, the facilities team at Northstar Services, whose Q2 travel spend finished above plan. Use it as a pattern for your own cost centre. In this simplified cash-spend example, the June airfare invoice was paid in June and is recorded in Q2; the trip is in September. A real commentary must use the organization’s reporting basis—an invoice date alone does not establish when an expense is recognized.
From the number to the explanation
Four moves, shown with the Northstar facilities travel example
1. State the plan, the actual and the gap
Lead with the amounts, the period and the direction. Do not make the reader work out the gap.
- Planned Q2 travel: $48,000. Actual: $61,500.
- Variance: $13,500 over plan (+28%).
- Opening line: "Facilities travel finished Q2 $13,500 (28%) over plan."
2. Break the gap into causes you can name
Split the total into distinct drivers, each with its own amount, so the pieces add back to the whole.
- $6,200: airfare for a September site audit, booked, invoiced and paid in June in this cash-spend example.
- $7,300: fortnightly inspections at the new regional depot, added in April.
- Check: $6,200 + $7,300 = $13,500, which matches the total variance.
3. Label each cause as timing or structural
Say whether each driver is expected to reverse or to continue. This decides whether anyone needs to act.
- The airfare was planned for Q3, so the Q3 budget should come in about $6,200 under. That is timing.
- The depot inspections cost about $2,430 a month and will recur. That is structural.
4. Write it as a short commentary that ends with a proposal
Completed example, ready to adapt:
- "Facilities travel was $13,500 (28%) over the Q2 plan of $48,000. $6,200 is timing: September audit airfare was invoiced in June and will reduce Q3 spend by the same amount. $7,300 is structural: fortnightly inspections at the new regional depot began in April at about $2,430 a month. If unchanged, they add roughly $14,600 over Q3 and Q4. Proposed action: monitor the timing item, and review the inspection schedule with our finance partner before the next forecast."
The evidence behind the example
Illustrative sample USD cash-spend figures for the Northstar Services facilities cost centre, Q2 (April to June), as of 3 July. These are authored values, not live analytics or an accrual-accounting example.
$48,000
Planned Q2 travel spend
$61,500
Actual Q2 travel spend
+$13,500
Total variance (+28% of plan)
$6,200
Timing: September audit airfare invoiced early
$7,300
Structural: new fortnightly depot inspections
Timing or structural? Say which, and show why
The label matters because it changes the next step. Support whichever one you choose with something a reader can check.
Timing difference
The spend was planned but landed in a different period, so it should reverse.
- Typical signs: an early or late invoice, a prepayment, a delayed delivery or a shifted project milestone.
- Evidence to cite: the invoice date against the original plan month, and the period where the offset should appear.
- Say when it reverses, for example: "Q3 should come in about $6,200 under plan."
- Next step is usually to monitor and confirm the reversal.
Structural change
The underlying cost level has moved, so it will keep affecting future periods unless something changes.
- Typical signs: a new recurring activity, a rate or volume change, or a supplier or scope change.
- Evidence to cite: the date the change began, the monthly run rate, and the cause (for example, a new depot added to the inspection schedule).
- Say what happens if nothing changes, for example: "about $14,600 over the next two quarters."
- Next step is usually to review the activity or discuss a budget adjustment.
Evidence checklist before you send
Each item is something you can verify
- Compare like with like. Use the same period, the same cost category and the same currency for plan and actual.
- Make the pieces add up. Your named causes should sum to the total variance, and any remainder should be labeled "unexplained" rather than hidden.
- Cite the source and the date. Name the ledger report or invoice set and the as-of date, for example "sample ledger extract, 3 July."
- Separate confirmed facts from assumptions. Write "invoice dated 12 June" for a fact, and "we expect the Q3 offset" for an expectation.
- Give one number for the forward view. State the expected effect on the next period or the rest of the year, and say what it assumes.
- End with a proposal in plain words. Say whether you will monitor, investigate or propose an adjustment.
Sample conversation: why was the invoice early?
Choose a proportionate next step
Propose one in your commentary. The decision on what happens next sits with you and your finance partner.
Monitor a timing shift
Fits when the cause has a known offset.
- Note the period where the reversal is due.
- Re-check actuals after that period closes.
- Mention it again only if the offset does not appear.
Investigate a recurring cost
Fits when a structural driver continues.
- Confirm the monthly run rate and the start date.
- Ask whether frequency, scope or supplier can change.
- Bring options and their costs to your finance partner.
Discuss a proposed adjustment
Fits when the change is intended and will last.
- State the amount and the periods affected.
- Explain why the change is needed.
- Ask your finance partner how adjustments are handled for your cost centre.