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Budgeting vs Forecasting

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Written by   101
1 year ago

Budgeting vs Forecasting

Budgeting and forecasting are two activities that are often used in sales and in the general business environment. Although both deal with money management and part of business management, budgeting and forecasting are two completely different tasks and should not be used differently.


Budgeting aims to determine the company's expenses by providing a gauge or reference point so that the company does not overpay and enable it to perform other critical business activities. A spreadsheet form showing a detailed accounting of expenses is required in a given period. Specifically, it involves recording costs, funds, and expected revenues to serve as a reference for future planning, analysis, and other activities.

The budget is perfect each year, although in some cases it can be done weekly, monthly, or quarterly depending on the type of business. This can lead to future savings or spending depending on the numbers shown. Needless to say, contingency plans (such as alternative sources of funding or expected income) can be implemented during this process. Budgeting comes in many forms, depending on the function and the context in which it is used. These include business budgeting, family budgeting, and personal budgeting.


Forecasting, on the other hand, is the act of predicting future trends and activities in a particular industry or company. Typically, the assessment involves the potential or expected income or the source of said income. Forecasting helps with budgeting by providing the expected amount for the actual budget. Based on the scheduled information, people will get the necessary actions to maintain or increase productivity.

Forecasting involves comparing data and creating alternative scenarios. External and internal factors can affect the forecast, so it is important to consider the company’s financial status, industry status, and many other factors.

Unlike budgeting which is usually done annually, forecasting can be done more often. But like budgeting, it takes the form of a spreadsheet or a written report consisting of predictions, movements, and recommendations.

Forecasting can fall under different types: qualitative, quantitative, explanatory, and time-based methods.

To put it simply, budgeting refers to the financial target while forecasting banks on a forecast of future performance related to historical and contemporary status of the effort.


Budgeting and forecasting are two different but related business activities that a company does at a particular time. Both activities are considered internal tools that work together within an organization. The two tasks are usually part of the management and operation of a particular business.

Budgeting is the conduct of an analysis of a company’s money and future earnings. It usually takes into account the calculation of the company’s current funds, expected revenue, and costs. On the other hand, forecasting is the practice of predicting where the expected income will come from and whether it will take increased efforts to achieve a specific target.

Budget is formulaic, and usually involves monetary and financial terms such as money, expenses, and funds. Forecasting also involves money to a certain degree, but it does not require a formula with reports that are usually done in a narrative way. In forecasting, there is also the issue of effort and manpower to create the required revenue or to maintain the current efforts set in a particular revenue target.

The budget determines the amount of money in the company and what appropriate actions need to be taken under the circumstances. It is usually presented in a spreadsheet form. Meanwhile, the forecast determines whether the effort is sufficient or not. The forecast is often seen as a spreadsheet or as a written report.

One way to prepare for the unexpected is through budgeting. In technical terms, budgeting is the systematic allocation of one's limited resources (income and liquid assets) to a potentially unlimited number of needs and wants (costs). To put it simply, budgeting is just balancing your departure against your income.

Unfortunately, the word "budget" -type of such as "food" or "save" - ​​has negative connotations. Though sometimes tedious and hard to stick to, smart budgeting can help you take better control of how your income is spent - leaving you with more money to invest or eliminate for inevitable rainy days. A budget is a financial plan for spending; Not a bookkeeping daily routine of keeping track of every penny.

The Budgeting Process

Budgeting is essentially a management process that follows the following steps:

1. Establish your goals.

2. Estimating your monthly household income.

3. Estimating your monthly expenses.

4. Balancing the budget.

5. Putting your plan into actions.

6. Adjust budget as needed.

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So nice article

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