When prepping for the year ahead, businesses sometimes ask our team why they need both a budget and a forecast. A budget and a forecast are not interchangeable and both are necessary tools to manage the financial health of a business.  

A business budget is a financial plan based on the expected revenue and expenses of the upcoming year. Budgets are usually set based on historical data and used to monitor the performance of a business against the business’s goals. Budgets are used to set financial targets, allocate resources, control spending, and manage cash flow.

A business forecast is a prediction of the future financial performance of the business. Forecasts use industry trends, market conditions, competition, and other factors. Forecasts can be made over a longer period of time and may be less detailed than a business’s budget.  Forecasts are essential for key leaders to make strategic decisions as well as plan for the future. 

At Palmetto Accounting, we work as an extension of your business. We learn the ins and outs of what makes your business unique while understanding your day-to-day operations as well as your strategic goals. We can create both budgets and forecasts to better advise our clients to give them the tools necessary to meet both their short and long-term goals.