See how you can automate your forecasting processes, forecast the impact of multiple scenarios, and quickly identify where, when and why actuals differ from plan, so you can take appropriate action:Ĭentage Corporation’s Planning Maestro is a cloud-native planning & analytics platform that delivers year-round financial intelligence. Second, it’s obvious that companies looking to gain better control of their financial outlook need tools that streamline all three of these processes to make them more accessible to organizations of all sizes.First, an examination of budget versus actual analysis, scenario planning, and reforecasting make clear that these three processes can work well in concert together and provide what companies might be looking for with “budget forecasting”.There are two very important takeaways from a high-level look at these three processes: ![]() When combined, these processes could be seen as a type of budget forecast, despite that term being a constructed one. Companies can put these processes or “budget forecasting techniques” into practice to help with getting a clearer financial picture of the business. ![]() Reforecasting provides an opportunity for organizations to take advantage of a changing competitive landscape and adjust to accommodate significant divergence from an annual budget. In reforecasting, companies revisit their budget to adjust projected revenues and expenses. Reforecasting goes hand in hand with budget versus actual analysis and can leverage scenario planning to keep companies on track. Sometimes called “budget flexing,” reforecasting is a third budget process that may get incorrectly labeled as budget forecasting. The combination of these what-if scenarios could create a map forward, a kind of “budget forecast” for a company to follow. Essentially a kind of budget forecasting is done when finance teams put together what-if scenarios and lay out a plan or budget for each scenario. A third scenario might be a “best case” version, the flip of the worst case. Yet another scenario could be created to illustrate financials in a “worst case” situation like if a large anticipated contract falls through, sales fall short, or production overrun cannot be sold off. For instance, one scenario may be very similar to a company’s annual budget, leveraging previous performance and anticipated revenue to lay out a plan. Scenario planning – or “what-if” planning – models different financial potentials based on a set of assumptions. There is a predictive element to scenario planning that could be conflated with forecasting. Scenario planning is another process that may be misunderstood to be budget forecasting. A review of your budget’s performance will clarify where variances exist and forecast how budgets may need to change to continue to meet business needs. So how exactly does budget forecasting come in here? While budgets may be done infrequently – many companies still adhere to an annual budget plan – a budget versus actual analysis can, and should, occur more regularly so that course corrections can be made.įor those looking to understand a “budget forecast”, budget versus actual analysis may be part of the puzzle. This is why analyzing your actual expenditures and income – a budget versus actual analysis – is important. It’s uncommon for two years of a business to be exactly the same, or for every assumption to bear fruit. Planning expenses against projected income drives businesses to meet operational needs while earmarking resources to put toward company goals.īudgets, however, are based on previous performance and assumptions. Budget vs Actual AnalysisĪ budget is familiar to anyone with a bank account, and certainly to even the smallest of organizations. ![]() While companies may not find a budget forecasting definition, understanding things like budget versus actual analysis, reforecasting and scenario planning may help to fill the gaps that business owners are trying to wrap their heads around when they think of budget forecasting. Those defining it are pulling together several financial tools and processes to help us understand budget forecasting, which are all important elements to creating a complete financial picture for a company. ![]() While it’s not really a financial term, there are a number of industry practices that business owners could interpret as budget forecasting. But the term itself can cause some confusion. The term “budget forecasting” is garnering a lot of attention lately.
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