Finance & AccountingFree
Budget Variance Commentary and Board Slide
Every material variance explained in prose, with the offsetting movements inside a line surfaced, and the board slide built alongside the narrative.
River's variance explainer reads the trial balance against budget and returns three artifacts. Those are a narrative with a stated materiality threshold, a sheet of variance by account with a driver tag on every line, and the single board slide with its speaker notes. Materiality is applied to each movement inside an account rather than to that account's net, so a line that came in on plan because two large opposite movements cancelled still gets explained instead of filtered out.
Every variance generator on page one filters on the net variance first, then explains whatever survives the filter. The disclosure rule a listed company answers to says the opposite: Item 303 of Regulation S-K asks for the underlying reasons behind material changes and names the offsetting case in its own text. In the worked example below, cost of revenue lands 4,200 favorable, 0.2 percent off plan, and carries a 186,400 freight increase that repeats every month from April.
Written for controllers and FP&A analysts with a close meeting tomorrow and a board pack due. It reads the normalized trial balance the close produced, so the numbers in the narrative are the numbers in the ledger. The month end close checklist is where the variance step sits, the 13 week cash flow forecast is where a timing variance gets a reversal week, and the lender reporting package is where the same figures get certified.
A threshold on the net is the wrong filter
The same rule sets the driver taxonomy. Item 303 asks a registrant to state how far a revenue change is attributable to price, to volume, or to new products, which is a fixed vocabulary rather than a free text note. So every line here carries one of those tags plus rate, timing and one time, and the tag decides the sentence. Instrument sales came in 142,500 ahead on one extra unit at 130,000 and 500 more per unit across 25 units.
An explanation you got from the person who owns the line is not yet evidence. The audit standard on analytical procedures is direct about it: management responses should ordinarily be corroborated, and a difference nobody can explain signals an increased risk of misstatement rather than a gap in the write up. So the narrative splits three ways: explained and corroborated, explained on management's word with the corroborating document named, and unexplained.
The slide is not a reformat of the narrative. A board reads one number and one bridge, so the slide carries the operating income bridge from plan to actual, the bars that make it up, and the one sentence that is actually the news. The speaker notes carry the answer to the question the bridge invites, which in the worked example is why a favorable month is the month you raise the freight problem. Both artifacts move together when a number changes.
How it works
Add the numbers
Paste the trial balance and the budget, or the variance export your accounting system already produces.
Name the comparison
Say whether this runs against budget, the latest reforecast, prior year, or all three at once.
River decomposes each line
Each account breaks into its own movements before any threshold applies, then every driver is tagged.
Work the unexplained
Take the movements nobody could account for into the close meeting and settle them there.
What you get
- Materiality applied to each movement inside an account, not to that account's net variance
- Revenue variances split into price, volume and new product effects, each with its arithmetic
- Every driver tagged one time or recurring, with the run rate effect on the remaining months
- Three explanation states on every movement: corroborated, asserted on management's word, or unexplained
- The board slide with its bridge and speaker notes, built from the same figures as the narrative
- The threshold printed on the page, so next month is measured against the same test
Common questions
What materiality threshold does it use?
Whatever you set, and it prints on the page so next month applies the same test. Absent an instruction it uses the greater of 25,000 or ten percent of the budgeted line, which is the dual test FP&A teams already run. The difference is where it is applied: to each movement inside an account, not to the account's net.
Will it invent a reason for a variance it cannot explain?
No. Movements with no supporting detail in the data you supplied come back on their own list, with the document that would settle each one named. In the worked example 17,200 of the G&A overage sits in professional fees with no invoice detail behind it, and that is what the list says rather than a guess about legal work.
What is an offsetting variance and why does it matter?
Two large movements inside one account that cancel, leaving a small net. Cost of revenue in the worked example lands 4,200 favorable while carrying 186,400 of new freight and a 190,600 one time inventory revaluation. A filter on the net drops the line. The freight repeats every month and the revaluation does not, so the run rate is 186,400 worse. A stale standard cost is one cause.
Does it produce the slide, or just the words?
Both, and from the same figures. The slide carries the operating income bridge from plan to actual, one bar per driver, and the sentence that is the news. Its speaker notes answer the question the bridge invites. Change a number and the narrative, the sheet and the slide all move together.
Can I run it against prior year instead of budget?
Yes, and against the latest reforecast, and against all three at once. Prior year is the comparison a lender and an auditor reach for, and it behaves differently. A favorable budget variance sitting beside an unfavorable prior year variance is the pair telling you the budget moved, not the business.
How does this fit the rest of the close?
It runs on the locked trial balance, so it is the last step of the close rather than a parallel one. The narrative it produces is the finance section of the board meeting memo, and the bridge is the chart that anchors a quarterly board update. Nothing is retyped between them. Being last also puts it on the critical path, which the close cycle diagnostic quantifies.
Budget Variance Commentary and Board Slide
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