Know The Difference Between A Budget and A Forecast?

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Image source: Reyner Media

Financial management directly influences the performance of your business. Overestimate cash flow, and you could find yourself in the red. Underestimate, and you could miss out on investment opportunities. To ensure proper fund forecasting and budgeting, businesses should always entrust their affairs with a financial planner, or someone who has intimate knowledge and experience with the market place.

How familiar are you with the difference between a budget and a forecast? Here’s a brief breakdown:

Budget

  • A budget is an expectation, a goal.
  • Outlines what a business aims to achieve during a certain timeframe.
  • A budget is a guideline for comparing actual performance and resulting variances.
  • Adjusted a few times a year

Forecast

  • A forecast is an estimate
  • Lists the current financial status and trajectory of the company
  • Should be updated on a monthly basis

Financial planners advise updating the budget more than once a year to accurately reflect changes in the business or marketplace, especially if you’re in an industry that rapidly changes and will render your initial budget irrelevant halfway into the year.

These demarcations help ensure businesses are steering down the right path. If the forecast is much lower than the budget, adjustments can be made to course correct. One can then analyze and make tweaks to the reports to bring these figures closer together.

In need of a financial planner to effectively set budget and forecast predictions for your company? Contact the Austin CPA’s at Millan & Co. to set up an appointment.
E-mail samantha@millancpa.com or call Phone: 512-479-6819

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