Budgeting is a systematic process for:
Budgeting and annual planning is typically a thorough look at the business and estimating how business will be performing about 6 to 12 months later. Whereas, forecasting is a process to look at critical components that will most impact future results. We can only forecast; we cannot predict the future.
We all forecast every day in all aspects of our lives. We all use data points and intelligence to make our forecasts. For example, the route we took this morning was based on our forecast of the traffic.
We use the same things to forecast in business:
The impact of the Great Recession was further impacted by the expanding global economy. Threats and opportunities can appear in an instant, heightening the effects of an already dynamic market. We are in the midst of a radically changing global economic environment:
Companies need to consider more data when understanding their market opportunities and threats. When we can incorporate the intelligence of finance and sales operations planning, we can create an integrated business plan. Companies must evaluate their market position more frequently than annually or perhaps even quarterly. When we evaluate these same elements in a more dynamic fashion, we are forecasting strategically.
For more information on strategic forecasting, you can download KnowledgeLeader’s Strategic Forecasting Guide along with two benchmarking tools focused on budgeting KPIs: