A budget only earns its keep when actual results are compared against it every month and someone explains the differences. Budget versus actuals (BvA) is that comparison. Done well, it turns the close into decisions: hire now or wait, raise spend on a channel or cut it, start the fundraise early.
Build a budget the ledger can match
The most common reason BvA gets skipped is that the budget and the ledger do not line up. Build the budget on the same chart of accounts and department structure as the books, monthly, with revenue built from the ARR plan and headcount built person by person.
| Budget block | Driver |
|---|---|
| Subscription revenue | ARR plan: new, expansion, churn by month |
| Services revenue | Implementation pipeline and capacity |
| Cost of revenue | Hosting per customer or usage, support headcount |
| Headcount | Role, start date, salary, taxes and benefits, by department |
| Non-headcount opex | Vendors, tools, marketing programs, rent |
| Cash items | Billing terms, capex, tax payments |
The monthly review
- Close the books.
- Pull actuals by account and department for the month and year to date.
- Compare to budget and to the latest reforecast.
- Flag variances above the threshold.
- Write one line per flagged variance: what happened, whether it is timing or permanent, and what changes because of it.
Commentary that is useful
- "Hosting 18% over budget: two enterprise customers onboarded early; usage-driven and recovered in revenue" is useful.
- "Hosting over budget" is not.
Timing variances (a hire who started a month late) reverse on their own; permanent variances (a price change, a lost customer) change the forecast.
Reforecasting
Leave the approved budget alone. Reforecast quarterly, or monthly when the business is moving fast, and show three columns: budget, reforecast and actual. Runway and hiring decisions come from the reforecast.
For the board
The board needs five lines more than fifty: revenue, gross margin, operating expense by department, net burn and ending cash, each against budget, with commentary on the two or three variances that matter.
We build the budget on your chart of accounts, run BvA after every close and write the commentary with your leadership team, so the board pack explains itself.
Thresholds and cadence
A practical rule: explain any line that is off by both a percentage and a dollar amount (for example, more than 10% and more than a set dollar figure). Using both prevents small lines from generating noise and large lines from hiding behind small percentages.
Headcount is most of the budget
For most SaaS companies, people are the largest cost. Track the hiring plan role by role: planned start date, actual start date, salary, and fully loaded cost. Most opex variances trace back to hiring timing, and seeing them role by role makes the reforecast straightforward.
Revenue variances
Break revenue variance into the ARR bridge components: new, expansion, contraction and churn versus plan. "Revenue 6% under plan" is not actionable; "new ARR on plan, churn two accounts above plan" is.
Tying BvA to cash
A P&L on budget can still burn more cash than planned if collections slip or annual prepayments move. Show net burn and ending cash against budget alongside the P&L so the board sees both.
Tools
Spreadsheets work well for early-stage companies when the budget is built on the same chart of accounts as the ledger. As complexity grows, a planning tool connected to the accounting system saves time. We work with either.
Sources
Questions founders ask
Should we change the budget when the year goes differently?
Keep the board-approved budget fixed and add a reforecast. Comparing actuals to both shows whether the plan was wrong or the execution was.
What variance is worth explaining?
Set a threshold, for example a percentage and a dollar amount together, and explain anything above it. Small variances on small lines are noise.
