Budgets and Forecasting

The holiday season is upon us and the New Year will be here before we know it. For most business owners, this is also the season of financial planning and budgeting for 2013. Some have even gone through the budgeting and forecasting process to be better prepared for the upcoming year. But have you ever wondered about the necessity of doing both a budget and a forecast? Do you even know the difference between budgets and forecasting? Often, the terms are used interchangeably.

Budgets and Forecasting

While this topic has often been the subject of debate, the budget and forecast differences are actually very clear. The success of any business is dependent upon the handling and management of the finances. This is exactly why knowing the relationship between these two important tools is not only useful in planning for the future, but is also excellent for keeping the business moving forward throughout the year. Here’s an excerpt from wikicfo.com highlighting how budgets and forecasts are different, but how both can be very useful tools for business owners and key decision makers when it comes to the financial planning of the company

Budgeting can be a good tool to use to help plan the future of the business; however a greater predictor of future behavior is past behavior. The purpose of investing time to create a financial forecast is to predict the future based upon certain assumptions while using the past to defend those assumptions.

Read the full article here.

If you need help creating an accurate forecast, then download our free Goldilocks Sales Method whitepaper to project accurately.

Budgets and Forecasting

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Budgets and Forecasting

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3 Responses to Budgets and Forecasting

  1. Sergio Luna December 5, 2012 at 2:23 am #

    A budget refers to a one year plan. Normally most companies make a plan budget that includes all the tangibles aspects of income and expenses including capital expenditures. The budget is used to drive a company to meet goals.

    The forecast is a future prediction of possibles sales, income and expenses considering actual economical situations. Normally companies uses forecasts to meassure actual results vs/ the forecast to improve companies preformance.

    Forecasts are build on a quartly bases and are feeded with actual enviromental changes to drive the companay to a succesfull result. The enviromental chages includes market changes to adjust production requirements, administrative expenditures, cost of material, etc.

    Sergio Luna C

  2. Mirketa December 10, 2019 at 4:56 am #

    Thanks for sharing such an informative blog

    • Allie Wilson January 24, 2020 at 2:35 pm #

      You’re welcome, Mirketa! If you have any other questions about budgeting and forecasting we have CFOs available online. You can email me at awilson@strategiccfo.com and I would be happy to provide some more information!

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