Budgeting vs Forecasting: Introduction

Trường Lăng

May 29, 2019

Budgeting vs forecasting is a good way to understand how the current financial position of a company contribute to determining its long term strategy. It is the process of allocating resources to meet the company’s strategic objectives in response to ever-changing circumstances.

What is Budgeting?

A budget is a detailed financial outline of the business’s activity over a period of time. The budget will include information about the company’s revenues, expenses, cash flow, and financial position.

The budgeting process is varied and dependent on the size of the company. It usually takes longer for a big company to complete this process as it must gather input from its some functional departments. Some organizations may go further in this process by having a continuous budget in response to changing business conditions.

What is Forecasting?

A forecast is a projection of expected business’s performance. It can use historical data, external industry and market indicators, to predict what will happen to a company in financial terms over a period of time.

Forecasts can be done over flexible time horizons. A long-term forecast will provide valuable output to the strategic management whereas short term forecast generally is done for daily operations.

While there are different functions in budgeting and forecasting, they are not mutually exclusive. A good forecast actually feeds a sound budget development. Comparing the latest forecast with the budget for the remainder of the period during the year can help the company make the necessary adjustments to meet changing business conditions.


Related posts

Doing Business

How to apply Reduced Income Tax in Indonesia?

Indonesia government has lowered the income tax rate for small and medium-sized businesses (SMEs) in July 2018, making it easier to open up business in ...

Read more

Opening A Bank Account in Indonesia: We Make It Easy for You

Opening A Bank Account in Indonesia: We Make It Easy for You Opening a bank account is one of the mandatory steps for every foreign ...

Read more

Initial Public Offering (IPO) in Vietnam – Legal Conditions

Conducting Initial Public Offering (IPO) in Vietnam 1. Definition and the Importance of Initial Public Offering  Initial Public Offering (IPO) is the process by which ...

Read more
Doing Business

Mergers and Acquisitions (M&A)

What is Mergers and Acquisitions (M&A)? Mergers and Acquisitions (M&A) is a general term which refers to the consolidation of companies or assets through various ...

Read more
How can we help you thrive? Let's work together