Knowledge · Applies to all markets
How do I compare budget to actual each month? Budget vs actual from your live books
Budget vs actual sets each line of the month's profit and loss beside what you planned for it, and shows the difference in money and as a percentage, marked favourable or adverse. Nella does this from the overall budget you keep in Xero, line by line against the same month's accounts, and lists spending with no budget and budgets with no spending separately.
What budget vs actual tells you
A budget is the plan: what you expect to earn and spend each month, line by line. Budget vs actual sets each line of the month’s profit and loss beside its budget and shows the difference. It turns “the month felt expensive” into “software costs were £1,200 over plan, and sales were £4,000 under”.
Done monthly, it catches drift early, while there is still time to do something about it. Done once a year, it mostly explains what already happened.
How to read a variance
| Line | Actual above budget | Actual below budget |
|---|---|---|
| Revenue | Favourable: you earned more than planned | Adverse: you earned less |
| Cost of sales and expenses | Adverse: you spent more than planned | Favourable: you spent less |
The variance is the actual minus the budget, in money and as a percentage of the budget. A line with no budget has no percentage, because there is nothing to divide by. A favourable variance is not always good news, and an adverse one not always bad: lower marketing spend is favourable on paper and may explain lower sales next quarter.
How it works in Nella
- Nella reads the overall budget you keep in Xero for the month you ask about.
- It matches each budget line to the same account in that month’s profit and loss, by the account names your chart of accounts uses.
- It shows each line’s variance in money and percent, marked favourable or adverse where the line’s nature is clear, with a summary for the month.
- It lists two kinds of gap separately: spending with no budget line, and budget lines with no spending. Neither is folded into the totals unseen.
Every answer names the month of the actuals and the budget it compared them with.
Which software
Nella reads budgets from Xero today: the overall budget you set up in Xero’s Budget Manager. If your Xero connection was made before budget access was added, Nella asks you to reconnect so it can read the budget. Budgets kept in QuickBooks, Sage or FreeAgent are not read yet. Where there is no budget to read, Nella says so rather than comparing against nothing.
If you rename an account after setting the budget, that line can no longer be matched and appears as a gap. Keeping the same account names on both sides keeps the comparison clean.
What it does not do
Nella does not set your budget or tell you what it should be. It does not decide which variances matter to your plans or what to change; it shows the differences, and the follow-up is yours. Your accountant can help with building a budget and reading what the variances mean for the year.
Example · illustrative figures
| October | Budget | Actual | Variance |
|---|---|---|---|
| Sales | £60,000 | £56,000 | −£4,000 (−6.7%) adverse |
| Subcontractors | £18,000 | £16,500 | −£1,500 (−8.3%) favourable |
| Software | £1,800 | £3,000 | +£1,200 (+66.7%) adverse |
| Rent | £2,500 | £2,500 | nil |
Nella also lists “Recruitment fees £2,400” as spending with no budget line, and “Training £500” as budgeted with nothing spent.
Related: What can an AI finance director do? and Are my books ready to close? Budget vs actual is only as good as the month it reads, so a closed month gives a cleaner comparison.
Sources
Nella provides financial information and education, not accounting or tax advice. Nella shows you the numbers. When a question needs professional judgement, such as a filing or a tax decision, Nella says so and points you to a qualified accountant.
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