Guide
Budget vs actual in Xero: run and read the Budget Variance report
Xero compares your actual results with a budget in one report, Budget Variance. This guide covers setting up the budget it reads, running the report, adjusting its variance columns, and reading the variances so they lead to a decision rather than a shrug.
Updated
First, the budget it compares against
The report needs a budget to read. Budgets live in Budget Manager: in the Reporting menu select All reports, then find and open Budget Manager (the search field in the top right corner finds it by name).
Every organisation has one Overall Budget, the default worksheet. You can add others, for example a budget set up for a tracking category such as a region or a department, and switch between them in the report later.
Run the Budget Variance report
- In the Reporting menu, select All reports.
- Find and open the Budget Variance report.
- Select a Date range, or click the arrow next to the date for a set period such as Last month or Month to date.
- Choose any other options (below), then click Update to run the report.
Xero Central lists the advisor, standard + reports and read only user roles as the ones that can open it.
Options worth setting
- Budget. The report uses your Overall Budget unless you pick another. If you filter by a tracking category, check that the budget column matches it.
- Filter. If you use tracking categories, click Filter, select the options to show and click Apply: budget vs actual for one region or one department.
- More. Choose the accounting basis, Accrual or Cash, and whether to show account codes and decimals. Keep the basis the same month to month.
How do you adjust the variance columns in Xero?
In the Budget Variance report, click Edit layout. Add a Variance column from the columns icon, choose the first column and the second to compare it against, optionally tick variance as a percentage of the second column, then click Update layout. Save it as a custom report so next month starts from it.
- In the Budget Variance report, click Edit layout.
- To add a variance column, click the columns icon and select Variance. To remove a column, click its heading, then the delete icon.
- In the toolbar, select the First column, then the Second column to compare it against.
- Optionally tick Variance as a percentage of the second column, then click Update layout.
Xero calculates the variance as the first column minus the second. As a percentage:
variance = first column - second column variance % = (first column - second column) / second column
With Actual as the first column and Budget as the second, a positive variance means actual came in above budget. Once the layout is right, save it as a custom report so next month starts from it.
What should you look for when reading the variances?
Set a threshold in money and in percent before you look. Then ask whether each variance is timing or permanent, and price or volume. Check the coding first, since a cost booked to the wrong account shows up as two variances that cancel out, and read the month and the year to date together.
Xero marks each variance with an arrow: up for an increase, down for a decrease, green when it is favourable and red when it is not. Total rows carry no arrow. Favourable means good for profit: revenue above budget, or costs below it. From there:
- Set a threshold before you look. Decide what size of variance, in money and in percent, deserves a sentence. Both tests matter: a large percentage on a small line is noise, a small percentage on payroll may not be.
- Timing or permanent? A bill that arrived a month early reverses next month; a price rise does not. Say which each variance is.
- Price or volume? Revenue below budget because fewer units sold calls for a different answer than revenue below budget because of discounting.
- Check the coding first. A cost booked to the wrong account shows up as two variances that cancel out. Look for the pair before explaining either.
- Read the month and the year to date together. A bad month inside a year that is on budget is a different conversation from a third bad month in a row.
Or have the variance read written for you
Ataski's Financial Analyst connects to Xero and prepares the monthly management report (we only read — never write to your books): profit and loss by tracking category, the balance sheet against the prior month, a 13-week cash forecast, and each line that moved explained by the accounts that moved it. The Xero connection does not read your Xero budgets; upload your budget to Ataski as a CSV file and the report compares actual results with it. Plans start at $599/mo, and the first month is free.
Sources
Menu, field and formula names are from Xero Central, checked in October 2026; Xero updates its menus from time to time. Budget Variance report and Edit a budget.
Questions
Where is the Budget Variance report in Xero?
In the Reporting menu, select All reports, then find and open Budget Variance. The search field in the top right corner finds it by name.
Do I need a budget before I run it?
Yes. Create one in Budget Manager, which opens from the same All reports list. Every organisation has one Overall Budget; you can add more, for example one per tracking category, and switch between them in the report's Budget field.
How does Xero calculate the variance?
A variance column is the first column minus the second. Shown as a percentage, it is that difference divided by the second column: (first - second) / second.
What do the green and red arrows mean?
The arrow points up for an increase and down for a decrease; green means the variance is favourable and red that it is unfavourable. Total rows, such as Total Cost of Sales, carry no arrow.
Does Ataski read my Xero budget?
No. The Xero connection does not ask for budget access. You upload your budget to Ataski as a CSV file, and the monthly report compares actual results with it.