Usually, most budgets require the use of historical data and also utilize some level of assumptions. In the case of the budget forecast, historical data is not referenced directly because the budgeted values are being forecasted. In a normal forecast, historical data is used to make a prediction on the future based on given assumptions. What makes a budget forecast unique is that it provides a financial view into the future if the budget were followed exactly. A budget is usually used as a roadmap, where a budget forecast provides a projection of the budget used for variance analysis. The primary difference between a budget and a budget forecast is their intended uses. Budgets are regularly updated and considered dynamic financial models. Usually, forecasts are not very detailed and tend to broadly group revenue and expenses. A budget is typically a static financial plan, meaning they are typically only updated once a year.Ī forecast uses historical information to produce a prediction of what the business will actually achieve. It is often compared to actual results and accompanied by variance analysis that explains any deviations from expectations. Budget vs Budget ForecastĪ budget summarizes the organization’s goals for the coming year and provides business leaders with a financial guide to reference when making decisions. The budget forecast is used in an attempt to predict the outcome of the budget, if followed exactly. Once a budget is created and expectations are formed for the upcoming year, a forecast is created to model what the budgeted values should achieve. What Is A Budget Forecast?Ī budget forecast is a type of forecast that takes its inputs from the budget for the upcoming fiscal period. In this FAQ we will provide a comprehensive view of a budget forecast and how it differs from a budget, why it is important, and the basics of creating one. This is because both of these practices are critical components of a healthy fiscal plan, but each do slightly different things. While there is some commonality between the two terms, taking the time to understand the difference between the two is beneficial. A common point of confusion in corporate finance is the distinction between a budget and a budget forecast.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |