The meaning of adverse variances and favourable variances

1. Adverse variances refer to the difference between actual and budgeted figures that result in a negative impact on the business.
2. Favourable variances refer to the difference between actual and budgeted figures that result in a positive impact on the business.
3. Adverse variances can occur due to factors such as increased costs, lower sales, or inefficient operations.
4. Favourable variances can occur due to factors such as decreased costs, higher sales, or efficient operations.
5. Adverse variances can indicate areas where the business needs to improve its performance or make changes to its budget.
6. Favourable variances can indicate areas where the business is performing well and can continue to invest resources.
7. Adverse variances can be managed through cost-cutting measures, process improvements, or strategic changes.
8. Favourable variances can be leveraged to invest in growth opportunities, improve customer experience, or reward employees.
9. Adverse variances can impact the financial health of the business and may require corrective action to avoid long-term damage.
10. Favourable variances can contribute to the financial success of the business and can be used to achieve strategic goals and objectives.