Types of variance analysis

Variance analysis is the rubric for comparing actual results with plan — whether budget or rolling forecasts. There are three types:

• Traditional variance analysis — It works like this: compare actual amounts at the natural class account level to budget or forecast with a column that computes the dollar or percentage variance. Alight does this for all combinations of time periods — month, year to date, full year, etc.
• Not so traditional variance analysis — It should work like this, but usually doesn't: compare actual units, rates and amounts at the line item level to budget or forecast with columns that compute variances for all three data types. Alight does this.
• Causal analysis — Where actuals and plan line items include units and rate as well as dollar amount, you may compute a causal analysis variance. This variance type calculates how much of the total dollar variance is due to higher or lower units (the volume impact) or a higher or lower price/cost (the rate impact). Alight automatically computes volume and rate impacts for all revenue, expense, headcount and balance sheet line items that incorporate units and rates.