Spatial variability of liquid cloud water content and rainwater content is analysed from three different observational platforms: in situ measurements from research aircraft, land-based remote sensing techniques using radar and lidar, and spaceborne remote sensing from CloudSat. The variance is found to increase with spatial scale, but also depends strongly on the cloud or rain fraction regime, with overcast regions containing less variability than broken cloud fields. This variability is shown to lead to large biases, up to a factor of 4, in both the autoconversion and accretion rates estimated at a model grid scale of ≈40 km by a typical microphysical parametrization using in-cloud mean values. A parametrization for the subgrid variability of liquid cloud and rainwater content is developed, based on the observations, which varies with both the grid scale and cloud or rain fraction, and is applicable for all model grid scales. It is then shown that if this parametrization of the variability is analytically incorporated into the autoconversion and accretion rate calculations, the bias is significantly reduced.