Variance Analysis is a financial tool used to assess the difference between planned and actual performance. It helps businesses understand why they may have spent more or less than expected. By comparing budgeted figures to actual results, companies can identify areas that need improvement or adjustment, ensuring better financial control and decision-making. This analysis often focuses on key areas such as revenue, expenses, and profit margins. For instance, if a company projected a sales increase but saw a decline, variance analysis can pinpoint the reasons, such as market changes or ineffective marketing strategies, allowing for timely corrective actions.