A Guide to Variance Reports for Project Management

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Published in Project management on 14/02/2022, last updated 02/06/2023.

Have you been tasked with writing a variance report? Maybe you aren’t sure where to start. That’s normal. ‘Variance’ could encompass many things, so the term isn’t exactly straightforward.

Googling “variance report” might not have helped so far if you’re a project manager. That’s because variance reports are also used in finance, where they take a slightly different form. 

Don’t worry. In this article, we’ll walk you through what a variance report is, why you might need to write one, and how you can make it as useful and informative as possible. Let’s get started! 

What’s a variance report? 

To start, let’s define variance. Just as you might think, variance is “the quality of being different, divergent, or inconsistent.”

In project management, the goal of a variance report is simple — to explain the differences between what you planned for and what actually occurred. You’ll usually write one after the completion of a project, as part of reporting on its outcomes and evaluating its success. 

Often, variance reports focus on financial information, such as how much the project’s final costs exceeded or fell below what was budgeted for. They’re most commonly used in accounting and finance, with complex formulas and exclusively numerical data. But in a project management context, there’s no need for you to use them that way. 

Costs and timing are the values you’d most likely include in a project variance report. But you can adapt them to include all kinds of data, qualitative or quantitative. 

Why you need variance reports  

As the project’s manager, or even an individual contributor, you’re already familiar with how things turned out. You already know whether your project went according to plan, so writing a report about it might feel redundant. If someone wants that information, why can’t they just ask you? 

The answer is that leaders, stakeholders, partners, and anyone else involved in a project needs to be able to understand how it turned out, quickly and easily. They might be using your variance report to assess the success of your project, or learn how it could be conducted more efficiently next time. 

A variance report gives them access to that understanding whenever they need it, without needing to ask you, or anyone else, for your insights. 

What to include in a variance report 

To convey how much (or little) your project varied from the plan, a variance report includes four categories of information.

• The project’s budgeted or expected outcomes 
• The final costs or results in reality 
• The variance, or difference, between them 
• Why the variance occurred

As shown here, it’s not enough to simply tell people the project had different outcomes than expected. You need to explain exactly how much or little they varied, why it happened, and the impact it will have on your organization in tangible, practical terms. 

There are so many different kinds of variance you may need to include in your report. Some of the most common are:  

• The cost of goods and services required to complete the project
• The amount of resources the project consumed, from data storage to lumber 
• The labor required, and how much it cost the company 
• Unforeseen issues, like materials shortages, supply interruptions, or emergencies, and what they cost  

Each kind of variance will fall into one of two categories: positive and negative. 

• Good variance means accomplishing more than you expected, or with less resources
  • Coming in under budget 
  • Finishing ahead of schedule 
  • Producing more than you anticipated 

• Negative variance means the project took more more time, money, or energy to complete than planned
  • Exceeding your budget
  • Missing key benchmarks
  • Delivering work past deadline

How to write your report 

Usually, variance reports are pretty number-centric. Most use a 3- or 4-column table to show the expected value, actual value, the variance between them, and some notes on why it occurred. 

If your data is more qualitative, you could still use this formatting by adding point-form, bulleted text into your table. 

If your data is very text-heavy, you could also try clearly labeled sections for each category of data, such as staff experience, audience reaction, or customer sentiment. Use subheadings to clearly break down each section into the expected outcome, real outcome, reasons for the variance, and its impact. 

Remember that the stakeholders who will be reading your report are busy. They need to understand your message as quickly and easily as possible. 

That’s why you should prioritize clarity and legibility when writing your variance report. Here are a few tips: 

• Highlight or bold the most important information 
• If the report is long, start with a table of contents and executive summary
• Use headings and subheadings 
• Include plenty of white space around each section or column
• Make the report as clean as possible. If you’re using a table, remove the black bars between rows and columns, and align all the numbers in every column

Embrace the variance

As a project manager, you already have in-depth knowledge about your plans for the project, and how they turned out in reality. The goal of a variance report is just to express that knowledge in a clear, concise, and easily understandable way. 

Of course, variance reports are useful for leaders and stakeholders. But writing them can also give you a chance to pause, look back on your project, and think about what you learned. Who knows? You might even find that writing variance reports becomes an important part of your project management style.