While related, budgeting and forecasting serve distinct roles in financial planning. A budget sets financial targets, helping businesses or individuals allocate resources and control spending to remain within their means. It provides a framework for comparing expected outcomes against actual results. In contrast, a forecast predicts future trends and events that might impact finances, allowing companies to adjust their plans accordingly. Forecasts focus exclusively on future projections and don’t compare with past results like budgets do.
Budgets typically cover an entire fiscal year, making them a long-term resource allocation and decision-making tool. On the other hand, forecasts are more flexible and can span different timeframes depending on specific needs. This flexibility allows forecasts to be updated frequently as new economic data emerges, whereas budgets are generally more rigid, lasting for a year, and rarely altered unless significant changes occur. Both tools complement each other, with budgets providing a baseline and forecasts helping adjust strategies as new information becomes available.
source: https://www.trustbgw.com/blog/key-differences-between-budgeting-and-forecasting
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