Understanding Variance Analysis - Contracted vs. Actual Expenses – Tropic help center

Overview

The Contract vs. Actual Expenses Reporting feature helps you compare contracted commitments with actual supplier expense, enabling proactive variance management.

Note: This feature is available only for customers with an ERP integration.

You can see two tabs: Analysis and Catalog. The Catalog tab allows you to view all suppliers, including those without contracts or spend data.

Step-by-Step Demo

Watch this demo for a quick walkthrough of how to analyze Contracted vs. Actual Expenses in Tropic.

Note: For an enhanced viewing experience, click the expand icon in the top-right corner of the demo to enlarge the screen.

Click Start Demo or Play (top right corner) to begin the demo.

Tip: You can navigate back and forth between steps by positioning your mouse at the bottom of the demo screen. A progress bar will appear, allowing you to jump to different steps as needed.

Core Capabilities

Timeframe Filtering

You can filter supplier data over a variety of preset and custom time periods:

Current Timeframes: This Fiscal Year (default), This Month, Fiscal Year to Date
Previous Timeframes: Past Month, Past 3 Months, Past 6 Months, Past Fiscal Year
Future Timeframes: Coming Month, Coming 3 Months, Coming 6 Months, Coming Fiscal Year
Custom Range: You can select a custom start and end month to analyze specific periods.

Supplier Index Column Updates

Columns provide detailed variance insights:

Contracted Expenses: Expected spend based on contracts for the selected timeframe.
Actual Expenses: Actual spend from the accounting system for the same timeframe.
Variance Amount: Difference between contracted and actual spend, with conditional formatting to highlight favorable (green) vs. unfavorable (red) variances.
Variance Percentage: Percentage difference between contracted and actual spend.

Expense Details Summary

Quick filters and summaries are provided to highlight key insights:

Uncontracted Expenses: Suppliers with actual spend but no contract.
Overages: Suppliers where actual spend exceeds contracted spend.
Underages: Suppliers where actual spend is below contracted spend.
Missing Expenses Details: Suppliers with contracts but no actual spend.
Incomplete Contracts: Suppliers with contracts in an "undetermined" status.

Using Variance Analysis to Support Month-End Close

Variance Analysis helps identify missing or misaligned invoices, especially during month-end close.

Use the Underages view to identify suppliers with lower-than-expected spend. This can indicate missed accruals or unprocessed invoices.
Cross-reference Uncontracted Expenses to ensure all spend is tied to a contract where possible.
If you're using AI Invoice Match, you can validate whether expected spend has been incurred and confirm contract alignment.

💡 Tip: For best results, reduce uncontracted expenses to zero before forwarding invoices to Tropic. This ensures better invoice-to-contract matching and strengthens your audit trail.

Confirm What’s Passed to ERP

To ensure Tropic and your ERP system remain in sync during close, verify what data is pushed from Tropic into your ERP:

Bills: Invoices validated through AI Invoice Match are sent as bills to your ERP.
Accrued Expense Journals: Tropic can generate accrued journal entries for spend incurred but not yet billed.
Prepaid Entries: For contracts with prepaid terms, Tropic can push prepaid entries to align expense timing.

💡 Tip: Before month-end close, confirm that all mapping configurations between Tropic and your ERP (e.g., NetSuite, Intacct) are accurate. This includes supplier links, GL accounts, and contract-to-expense associations.

Spotting ERP Mismatches During Close

If you're using Tropic's Contracted vs. Actual Expenses report to support accounting workflows, you can quickly identify potential mismatches between ERP data and contract records.

Use the following filters to catch common issues:

Expense Underages: Shows suppliers with contract value but $0 in ERP spend. This may point to missing accruals or invoices not yet posted.
Uncontracted Expenses: Highlights suppliers with ERP spend but no active contract in Tropic. This could indicate expired or missing contracts.

To tighten your accruals process:

Add the Status column to verify whether any contracts are Inactive or Undetermined.
Focus on the current month using the Timeframe filter to narrow your review window.

💡 Tip: If you find a supplier with spend but no matching contract, reach out to the contract owner or submit a contract update request. Keeping contracts current helps reduce errors during close.

Example: Use filters like Expense Underages and Timeframe = current month to surface suppliers with lower-than-expected spend. Check for mismatches between Contracted and Actual Expenses, and confirm supplier statuses and departments to investigate further.

Setup Requirements

To access this feature, ensure your account is integrated with an ERP system. ERP integration enables the detailed spend and variance reporting required for Contracted vs. Actual Expenses analysis.

Clean and complete contract data.
Proper matching of actual spend data to the corresponding supplier contracts.

FAQs

Q: Why is overspending represented with a negative variance?

A: Negative variances indicate unfavorable outcomes (overspending), while positive variances represent favorable outcomes (underspending). Conditional formatting highlights these with red and green colors, respectively.

Q: What should I do if I notice data discrepancies in my report?

A: Discrepancies can occur when actual spend data isn't properly matched to supplier contracts or if contract records don’t accurately reflect spending patterns. To resolve this, review your contract records to ensure values and dates are correct. You can also use supplier matching tools to link actual transactions to the appropriate suppliers.

Additional Resources

For more training guides or documentation, please visit our Help Center. Our resources provide detailed guidance to help you navigate Tropic effectively.