In: Accounting
Budgeting | Forecasting |
Budget can be defined as a financial or business plan that is prepared for the forthcoming period. | Forecast can be defined as the estimation of the future trends or outcomes based on historical data |
It explains the set targets of the business that management wishes to achieve during a particular period | It is the prediction of what the company may achieve during a particular period on the basics of present and past business conditions. |
This is a static statement i.e. it remains the same for a particular period. | This is more flexible and changes according to the changes in the business environment. |
It acts as a guidance for the company regarding the direction it should go in order to achieve its objective and to achieve operational efficiency. | It acts as a tool that helps the management to be proactive rather than reactive, and acts as inputs for preparing future budgets. Forecasting also help the origination to set its long term plans. |
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