Budgets and Forecast
Introduction
Budgets and Forecasts are predictions of future income and expenses and cash flow. They
also predict future performance with financial forecasts and projections and with financial
models.
Why Budget and Forecast? Budgets and forecasts provide a feasibility analysis. They can
help develop a business model, review the companys key assumptions, and identify
resource and capital needs. Budgets and forecasts can be used to find funding. They
demonstrate the potential of the business to investors and lenders. Budgets and forecasts
can also be used as a management tool. They can help the organization establish
milestones and require accountability for accomplishing the milestones. They can help
identify risks and show benchmarks. This will help business owners make the necessary
adjustments to avoid the risks, to reach the milestones, and to measure up to benchmarks.
Forecasts are important because it can establish measurements to guide management, to
facilitate planning, and to facilitate goal setting. As part of the forecasts, the company will
review key concepts and issues that will make a difference in the companys survival. The
company also needs to forecast the resources it will need and set up a schedule for using
and replenishing its resources.
For years, companies have viewed their budgets and forecast simply as a mandatory
estimate of the upcoming years revenues and expenses. However, this attitude is quickly
changing as the marketplace becomes more competitiveand organizations become more
dynamic. Successful companies are constantly improving their ability to accurately predict
their future operations and their related resource requirements. Not only does this heighten
