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Variance

In financial terms, variance is the difference between planned and actual expenses or revenue. If revenue is higher than expected for a particular product line, that is known as favorable variance and indicates better-than-expected performance. In contrast, if revenue is lower than expected or costs are higher, that is called unfavorable variance.

What Small and Midsize Businesses Need to Know About Variance

SMBs can calculate variance for their costs and revenue, then total variances to obtain an overall picture of their business' performance in a single reporting period. High variance suggests that their methods for predicting costs and revenue aren't very accurate, which can impact cash flow.

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