Variance Commentary

name: variance-commentary
description: Turns budget-versus-actuals data into structured variance commentary with materiality ranking and verified arithmetic. Use when the user shares budget/actual or plan/forecast figures and needs variance analysis, monthly close commentary or a management reporting narrative.

Turn a variance table into the narrative that goes in the management reporting pack. A controller or CFO reads variance commentary with two questions: "is the math right?" and "does each explanation actually explain anything?" Most commentary fails the second test. "T&E was over budget due to higher travel spend" is a restatement, not an explanation. Every comment here must carry real information or honestly say the driver is not yet known.

Inputs

• Budget vs. Actuals data: pasted table, uploaded spreadsheet or figures in text. Required. Note the period (month, quarter, YTD) and whether figures are entity-level or consolidated.
• The firm's materiality threshold if one exists. Otherwise propose one from the data's scale. Typically the greater of a percentage (5–10%) and an absolute floor and confirm before writing.
• Known drivers for major variances, if the user has them. Ask once; do not block on it.

Workflow

1. Check the math first. Recompute every variance (absolute and percentage) from the raw budget and actual figures, re-foot subtotals and totals and verify the pieces sum to the whole. If anything does not tie out, report each discrepancy. With both the stated and recomputed values. Before writing any commentary. Never write narrative on top of numbers that do not reconcile; broken arithmetic in a reporting pack destroys the credibility of everything around it.

2. Rank by materiality, not by line-item order. A $15K variance on a $50K line (30%) and a $200K variance on a $20M line (1%) both need a look; apply the threshold on both dimensions and note near-threshold items in one line each.

3. Write each material variance comment to the formula: direction, magnitude, driver, permanence:

Weak: "Compensation expense was above budget due to higher headcount." Strong: "Compensation $310K (6.2%) over budget YTD through March: two investment hires started in February versus the June budget assumption. Approximately $155K per month combined, two unbudgeted months to date (driver per user). Permanent within the year: four unbudgeted months in total by the June start date the budget assumed, so full-year impact approximately $620K vs. Plan."

Rules for the formula:

• Driver: only from the user or visible in the data itself (a one-time item labeled in the ledger detail). Otherwise write "driver TBD. Confirm with [budget owner]". A plausible-sounding fabricated driver is the single worst failure mode of this document.
• Permanence: classify as timing (reverses within the fiscal year: an invoice slipped a month, an accrual trued up) or permanent (a run-rate change: headcount, renegotiated contract, lost revenue). If the classification is not determinable, say it needs classification. The CFO cares about this distinction more than the variance itself, because timing washes out and permanent compounds.
• Full-year read: for permanent variances, extend to the full-year impact if the run-rate math supports it, labeled as an extrapolation.

4. Handle offsetting variances honestly. When a category is on budget only because two large opposite variances net out, say so. Netting that hides two stories is how surprises get built. A pack-ready example combining the offset disclosure with the timing/permanent call:

"Professional fees net on budget for the quarter, but the netting hides two stories. Legal $80K (22%) over. Fund III side-letter negotiations ran longer than planned (per user); permanent for the year. Consulting $75K (19%) under. The data-platform project slipped to Q3 (per user); timing, expected to reverse in full. Full-year read on the category: approximately $80K over plan."

5. Lead with the executive summary. Three or four sentences a CFO could lift directly into the pack: total variance and direction, the two or three variances that matter, the timing-versus-permanent split and the full-year implication.

6. Close with the follow-up list: every "driver TBD," every unclassified timing/permanent call, every data discrepancy. Each with the owner who can resolve it, if known.

Output order

Executive summary → material variance commentary (ranked) → near-threshold notes (one line each) → data discrepancies (if any) → follow-up list.

Guardrails

• Never invent a driver, however plausible. "Driver TBD" is a professional answer; a fabricated explanation in a reporting pack is not.
• Never smooth over data that does not tie out.
• Keep the tone neutral and factual. Commentary explains, it does not advocate or assign blame.
• Label any extrapolation (full-year impacts) as such; do not present projected figures with the same confidence as actuals.