Budget Forecasting Essay

Budget Forecasting

Budget forecasting is considered the lifeline of your department. What must be considered when creating your annual budget? How can shortfalls impact your operations?

Budget forecasting is the tool used by the companies to establish the plan as to the whereabouts of the management and the plans for the company. Although budgeting and financial forecasting are used together through the distinct difference that exists between the two or more concepts. Budgeting usually quantifies the revenue expectation for a business and the achievement of the future period as to where the financial forecasting as it estimates the income or the company’s revenues that might be achieved through a particular period. Budgeting is usually a representation of the company’s financial position through the goals and the cash flows. The company budget is normally evaluated through the periodical through the usual position which is per the fiscal year. Essentially depending on the management and the update on the information. Through the baseline, the comparison would be important in the halving of the actual result in a determination of the results varying by the performance expectation (Williams, D., & Calabrese, T. 2019).

While most of the company’s budgets are usually defined through the entire year, some company’s management always needs flexibility that allows the budget to be adjusted through the year as a business and the change in the conditions. On the other hand, financial forecasting essentially estimates the future of the company and the outcomes by having the historical data examined. Financial forecasting always allows the management teams through the anticipated results which are based on the previous data and finance. Through financial forecasting, the following are the characteristics of making the financial forecast;

  1. They are used in the determination of the company’s allocation through the future budgets for the period of the future.
  2. They should always be regularly updated in case of any changes within the operations, inventoried, and the business plan.
  3. It could be important in the creation of both short-term and long-term.
  4. The management team could be important as they can use the financial forecasting in the taking of the immediate based on the forecasting.

The annual budgets are always important as they are for every organization to maintain the finances (Coveney, M., & Cokins, G. 2017). The annual budget would not only provide the picture of the funding but also showing the funders of the money and the utilization of the company. This could also be used in the proposal of the funding. The following are the important points when considering the annual budget;

  1. Consult the departments within the organization as it plays the role of involvement to the company’s employees and stakeholders as a way of getting the departmental budget.
  2. Estimate Revenues and Expenses. These are important as they play an important aspect in the determination of the company’s expense and defined points of the things.
  3. Focus on the industry trends which could be important and assist in the future knowledge of the determinants of the company’s aspects.
  4. Construct the contingency plan.

In conclusion, the annual planned budget would be continual through the track and financial health of any business. Through the obligation understanding and the business opportunity, one could tend to set the priorities and the objectives while making long-term commitments through the vendors and making of the hiring decision.


Coveney, M., & Cokins, G. (2017). Budgeting, forecasting, and planning in uncertain times. John Wiley & Sons.

Williams, D., & Calabrese, T. (2019). The palgrave handbook of government budget forecasting. Springer Nature.

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