Projected state revenue through 2029 down by $903 million Office of Financial Management

If you are a small to medium-sized business (SMB), use flexible methods that make it easy to adapt your forecasts as your business grows and cash flow changes. Your teams can work together in real time, access the latest financial data, and respond proactively to changes to promote better impact. With the right mix of human insight, smart tools, and real-time data, your forecast becomes your advantage.

The Chancellor Rachel Reeves will set out her plans for the economy when she delivers the Budget on 26 November. Together, these practices not just establish financial boundaries but additionally enable you to adapt your strategies based on changing conditions. The forecast revenue for the 2027–29 biennium is around $79.5 billion, which is $477 million lower than projections in June. There are several approaches to doing this, one being straight-line, where revenue is spread out evenly across each forecasted period.

Tools to plan, fund, & grow your business

Revisit your projections monthly or quarterly to ensure alignment with reality. You have actionable insights into future scenarios, meaning you’ve evaluated options methodically and confidently. Did the company add additional revenue or lose business that was part of the budget? Budgets and forecasts serve distinct purposes in business planning and tend to cover different periods (although they can cover the same ones).

As with all financial plans, budgets facilitate accountability for financial results. They are generated before the start of the fiscal year and are usually updated semi-annually or quarterly. A budget is a financial plan that reflects the results of the strategic plan if executed exactly as modeled over the fiscal year. In the startup world, there are many more factors that should be considered. The terms budgeting and forecasting are sometimes used interchangeably, but they’re not quite the same. Startup founders will give themselves a great start by understanding the difference between budget and forecast.

How Does Inflation Affect Budget Forecasting Accuracy?

• The difference between budgeting and forecasting comes down to their specific roles in your business.
• Conversely, forecasts provide broader estimates that consider historical data and current trends, often covering multiple years.
• Instead of using outdated and outgrown spreadsheets for budgeting, it’s best to use a cloud-based platform to mitigate these challenges.
• Intuit Assist handles administrative items on your to-do list, so you can focus on big picture growth.
• This does not take into account the cyclical nature of most revenue and expenses.

You can maintain tighter financial control and proactively fix issues before they become major challenges with clear visibility into your expected revenues, costs, and cash flows. By eliminating the guesswork and providing insightful data, it allows for a quicker, more confident decision-making process. Hence, you can forecast your budget with a newfound level of clarity, making it easier to set achievable goals and plan for growth. Financial planning that considers both short-term and long-term views provides a well-rounded financial picture. This dual approach meets immediate financial requirements while keeping sight of strategic goals.

Challenges finance teams can face during financial planning

One thing to note is that a forecast budget is far from a mere accounting requirement. Doing it right can help you anticipate changes, recognize opportunities, and take corrective action when needed. Use the budgeted amount and spread it out over the course of the following year to generate the prediction. Keep in mind that the sum of all the individual time periods should match the annual budget amounts.

Purpose of Budgeting vs. Forecasting

Most businesses create a budget annually and implement it from the start of the fiscal year. The budget is also commonly considered “unmovable” and is used to gauge the performance of actuals or forecast data versus the planned budget. Its primary purpose is setting clear financial goals and systematically allocating funds to achieve those objectives. This enables individuals and organizations to control spending, prioritize investments, and evaluate performance against predefined targets. Imagine mid-sized SaaS company with 150 employees provides cloud-based collaboration tools to enterprise clients. In preparation for its new fiscal year, the company conducts a budgeting process in Q4.

Typically, previous data is utilized to predict the future based on certain assumptions. Because the budget forecast predicts budgeted values, past data is not directly referred to in this instance. Most budgets typically call for the utilization of historical data and some degree of assumptions.

The rate on 10-year Treasury notes falls, from 4.3 percent in the fourth quarter of 2025 to 3.9 percent in the fourth quarter of 2028, as it gradually adjusts to a decline in expected short-term interest rates. Financial forecasting and budgeting are somewhat two sides of the same coin. However, there are a few key reasons why forecasting is the better practice for small business owners to adopt. Keep in mind, that the further out you go, the less accurate your forecasts will become.

The process is fairly straightforward, but the work can be daunting if you’re new to it, so we’ll walk through each step one by one. A what is a forecast budget budget is a plan for spending based on estimates of expenses and income (or available funds) over a period of time. Budgets can be created for an individual, group, single project, or an entire business. They can be created for a fiscal year, a single year, or on a monthly or weekly basis (more common for personal budgets). Learn the difference between budgets and key types of forecasts for use in your ongoing business planning activities with this simple guide.

• Involving cross-functional stakeholders in the budgeting process nurtures ownership and motivation, driving the team to meet financial targets.
• A financial forecast is a report illustrating whether the company is reaching its budget goals and where it is heading in the future.
• The forecast is updated more frequently than the budget — usually monthly or quarterly.
• The increases in tariff rates implemented from January 6 to August 19 of this year are expected to curb U.S. imports and exports in the second half of this year and beyond.
• Budgets are intentionally more fixed to provide a reliable, consistent reference point against which companies can measure financial performance.

Where a set amount of resources are allocated for the next quarter or fiscal year and are regularly reviewed against actual results to determine accuracy and make corrections if necessary. Tuesday’s forecast does not cover revenue going to the state’s transportation budget, which is separate from the operating budget. A forecast covering that funding, including the gas tax, is expected on Friday. Freezing the thresholds means that, over time as salaries rise, more people reach an income level at which they start paying tax or qualify for higher rates.

Choose intervals that suit your business needs, whether that’s monthly, quarterly, or annually. Service businesses often use these forecasts to determine necessary staffing levels. Depending on the company’s size, there may be a budgeting process—often done toward the end of the year. In smaller companies, the owner or a few key employees, such as the bookkeeper, handle budgeting. Utilize the forecast to develop key performance indicators after the budgeted amounts are projected for each of the following months.

A budget functions as a financial benchmark against which actual performance can be measured. Understanding the differences between budgets, forecasts, and projections is just the first step in your development as a financial professional. Building expertise in these areas can fast-track your career progression and make you an indispensable member of your finance team. Each of these financial tools serves a unique role, but their true power lies in how they work together. The budget sets financial expectations, the forecast keeps expectations realistic as conditions change, and projections explore what could happen under different scenarios.

Tuesday’s forecast pegs revenue fueling this budget at $74.3 billion, even with the boost from $4.3 billion from new and higher taxes that legislators and Ferguson approved. Because a lot of information is available and not everything can be easily quantified, no statistical model can provide a perfect forecast, McCracken said. Two important components for forecasting the economy are data and a model. Essentially, the budget is your financial roadmap, while the forecast is your ongoing check on whether you’re following the map and if the road conditions ahead require a detour. In August the Bank cut interest rates for the fifth time in a year, taking the cost of borrowing to the lowest level for more than two years.

What Are The Types of Forecasting?

Budget vs. Actual analysis compares the income and expenses that were budgeted for with the actual income and expenses of the company. The importance of budgeting and forecasting in project management cannot be emphasized enough. Firms must adequately weigh in on the budget vs forecast debate, design a budget with reachable goals, and continuously monitor and upgrade their forecasts to spur resource efficiency, growth, and accountability.

Key Factors Affecting Budget Forecasting Accuracy

The solution should be easy to use, allowing business owners and team members from different departments to collaborate seamlessly. Accounting software, such as QuickBooks, can help generate budgets and projections without much effort. A budget’s key metrics or components include revenue targets, variable costs, and debt reduction goals. By setting revenue targets and estimating expenses, budgets enable business owners and management teams to monitor progress and make necessary adjustments to achieve desired financial outcomes. A budget typically comes before a forecast as it sets the financial framework for the year ahead, such as expected revenue and costs. A forecast follows and helps to project how actual performance compares to the budget.