Budgeting and forecasting comparison – infographic transcript

Use our budgeting and forecasting infographic (JPG, 442KB) to understand the differences between budgets and forecasts and when and why to use them.

Budgeting and forecasting comparison

Understand the difference between budgeting and forecasting and what you should do in between

Budgeting

Your financial plan for the year ahead

• Why budget?
  Work out how much money your business will need to spend so you can achieve your profit goals
• What to include
  • Sales targets
  • Expenses
  • Revenue goals
  • Profit goals
• Note: Use absolute values to create your budget
• How long it lasts
  A budget should cover the full financial year
• Why is it important?
  A budget helps you to:
  • formulate high-level strategies
  • measure and track your business goals
  • guide funding and investment goals
• Remember: Your budget will become less reliable towards the end of the year as the values become outdated.

Budget to actuals

Using data to update your predictions

• Why budget to actuals?
  Check your performance against estimates and adjust them to plan through the rest of the 12 months
• What to include
  • Existing budget figures
  • Costs and revenue data from recent sales and expenses
• How often you should do it
  Add your actuals to your budget to actuals spreadsheet monthly and update your forward budget (your forecast)
• Why is it important?
  You can check how effective your budget forecasting methods are and revise them. Use updated budget forecasts to make better business decisions
• Remember: Using actual trading data to adjust your budget is especially useful during unpredictable trading conditions

Forecasting

Measure your business's profits (the amount of money remaining after all expenses and debts are paid

• Why forecast?
  Predict future financials so you can plan for future profit, expenses and business decisions
• What to include
  A forecast contains expectations of actual cost and revenue data based off your previous sales, expenses and repayments
• Note: Include the % of values achieved and % to be achieved
• How far ahead to forecast
  Forecasts are usually done annually but are broken down into monthly amounts and are updated regularly with actual trading data
• Why is it important?
  Forecasting helps you make informed decisions about your business including:
  • stock levels
  • product price
  • sales targets
  • employee costs.
• Remember: Forecasting is based on actual trading data which makes it a reliable method of predicting your financial position

www.business.qld.gov.au
Queensland Government

Download our budgeting and forecasting infographic (JPG, 442KB).