Budgeting and Forecasting
Budgeting and Forecasting are part of your business’s finances and aid in managing your business into the future. It is the job of your senior management and financial department or an accountant to provide these for you to guide your business decisions over a set period of time.
What is the Difference?
There is a difference between budgeting and forecasting that can be tricky to distinguish for those uncertain.
Budgeting is the plan that is laid out for a business with sets goals of where they want to be and what they want to achieve.
Forecasting is the actual expectations set out for a business, often used for short-term considerations.
For a budget, a detailed representation of future results, financial position and cash flows is needed to set out what the business wants to achieve within a set period of time. It is not something that has to be updated regularly, although this may be recommended to re-align actual results with expected results upon comparison. Remedial steps can be taken when the budget and actual results don’t match.
A forecast is limited to major revenue and expense line items only, it does not require a financial position. Cash flows may however be taken into account. A forecast can be used in the short term for operational considerations within the business (i.e., production plans, staffing and inventory levels). This is updated at regular intervals to ensure the results remain short-term and realistic.
Why Do You Need an Accountant?
Having an accountant to help you set up your business’s budget and forecast can be a really helpful tool. Accountants are highly trained in looking at a business’s financial position and how they can work out a plan to achieve the business goals through budget and forecasting.
An accountant can work for you as an independent member of our team, or work alongside your team to guide and ensure you are working in the correct way when establishing your business’s budgeting and forecasting.