Favorable vs unfavorable variances explained

"We're over budget" is meaningless until you know over budget on what. The same dollar swing can be great or terrible depending on the account.

The core rule

• Income accounts: actual above budget is favorable.
• Expense accounts: actual above budget is unfavorable.

Flip the sign for the opposite case. Revenue under budget is unfavorable; spending under budget is favorable.

Score by net-income impact

The cleanest way to make this consistent is to translate every variance into its effect on net income:

• Income over budget → + net income.
• Expense over budget → − net income.

Now favorable always means "raised net income" and unfavorable always means "lowered net income," regardless of account type. Rank your drivers by the absolute value of that impact and the biggest movers rise to the top automatically.

Watch the divide-by-zero

Percent variance is undefined when the budget is zero. Don't print a misleading "∞%" — flag it as no-budget and let the dollar figure speak.

Materiality keeps it honest

A favorable $50 variance is not a story. Set thresholds — say $1,000 and 10% — and only call out variances that clear them. The rest is noise.

Get the direction logic right and the rest of the board report falls into place. VarianceDesk applies this scoring automatically to every QuickBooks account.