Difference Between a Budget and a Forecast | Ep 4

📊 Budgeting vs. Forecasting: Why Your Business Needs Both | Full Send CFO

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📢 Are you treating budgeting and forecasting as the same thing? Many business owners do—and it’s a costly mistake. In this episode, we break down:
✔️ The key differences between budgeting & forecasting
✔️ How CFOs use them together to drive business success
✔️ Why budgets are static, but forecasts must be updated
✔️ How to build a simple budget & rolling forecast today

⏱️ Chapters

00:00 - Introduction: Budgeting vs. Forecasting
00:32 - The CFO Mindset: How Budgeting & Forecasting Work Together
00:47 - Key Differences Between a Budget & a Forecast
02:52 - When to Use a Budget vs. When to Use a Forecast
03:23 - How Macroeconomic Conditions Impact Forecasting
04:27 - How to Build a Simple Budget & Forecast for Your Business
07:16 - Scenario Planning: Base, Best, & Worst Cases
07:53 - Final Thoughts: How to Make Budgeting & Forecasting Work for You

Key Takeaways:
✔️ A budget is a static plan—a roadmap for the year ahead.
✔️ A forecast is dynamic—it updates based on real-time business performance.
✔️ CFOs rely on both—budgets set goals, forecasts guide decision-making.
✔️ Review & adjust forecasts regularly—especially when conditions change.
✔️ Scenario planning (best, base, worst case) helps businesses stay agile.

📢 How often do you update your budget & forecast? Comment below!

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#Budgeting #Forecasting #FinancialPlanning #FullSendCFO #CFOInsights

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Full Send | Accounting & Data

LinkedIn: Roman Villard, CPA
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Transcript

Budgeting and forecasting are not the same thing. Most business owners I've talked to, they kind of lump them into the same category. When I ask for a budget, normally a business owner will say, well, we've got these ideas, we've got these thoughts, and we kind of have a loose budget based on what was in our QuickBooks, and it's really more of a wishlist when I ask for then the forecast.

I usually get that, well, isn't that kind of the same thing as the budget type response? But realistically, they're two different tools with two different objectives. The CFO mindset around budgeting and forecasting and how they work together to drive better decisions can change how you think about your financials and how you modify your planning process for your business.

So the key differences between a budget and a forecast are that a budget is a static plan for your revenue and your expenses over a set period, which is typically an annual planning cycle. You can also budget for the quarter and get a little bit smaller increments in there, but let's think about it through an annual planning cycle. The budget acts as the financial roadmap. It's what you expect to happen throughout the year without knowing for certain what's actually going to unfold. So you're setting that path in front of you. You're orienting your GPS towards what direction you want to go. So it's really good for goal setting.

It's really good for cost control. It's really good to assist with financial discipline to understand relationships between your anticipated spend. And the expected revenue that is generated from that spend now a forecast, on the other hand, is a dynamic rolling projection that will update based on real time performance.

So if you've oriented your GPS towards a certain location, and then along the route, you encounter traffic or an accident, Or some sort of diversion to your path. The forecast is what's helping you to navigate around that obstacle in order to continue marching towards your goals. You want to focus your forecast on, on predicting the future outcomes based on the business performance, because there's really only one thing that we can control and that's what's happening today.

We get a sense of control from looking at historical performance. We get a sense of control by trying to, Anticipate what's happening in the future, but realistically, you can only control what's happening today. And so while knowing that, we need to continually be updating the forecast based on the actuals that's impacting what's going to happen next.

So that forecast is rolling. It is continually evolving based on evolving conditions. Now, this is really more helpful for real time decision making, whereas if you go back to your static budget, that's more of a, uh, Uh, the initial outline of what you thought was going to happen to give you some indicators of what did you plan for relative to what happened to then help reinform the planning process for the next year.

Now, when do we use a budget versus a forecast? we're going to use a budget when we're setting annual financial goals and targets. So, what's our anticipated revenue? What's our anticipated hiring for the year? What's the anticipated sales and marketing expense. So we're setting that high level target for the year.

The forecast we're going to be utilizing for the real time business decisions. So we're going to be adjusting the spend, adjusting the hiring, adjusting the revenue as we learn more about what's unfolding in the business. As we record here in 2025, there are material macroeconomic conditions that are drastically impacting your ability to forecast really well.

And so if you're in the manufacturing space or you have overseas vendors, there may be tariffs that are incoming to your expenses that need to change how you're operating as a business. So you can forecast for some degree of tariffs on your cost of goods sold. However, we don't actually know where that's at.

So as we gather information, as we Understand performance of the business. We can then re forecast with those new figures. You're not going to be going back and updating your budget based on what's happened, you know, three months after your budget. Now, there could be some cycles in which you update your budget more frequently, but for this use case, we're talking about a rolling forecast that is continually updated after you've set your budget for the year.

So let's say your budget says you're going to make 2 million of revenue this year, and your forecast is actually trending a little bit closer to 1. 7 based on your current figures, the CFO is going to be adjusting the decision making in real time using the forecast and not necessarily the budget. So how do we get started with building a simple budget and a forecast? Uh, we want to start with our historical figures. What has the business done in the past to give us some sort of indicator of what's going to happen in the future, knowing that we can't control that? And so we're gonna start our budgeting process based on expected revenue, based on the fixed costs that you know that you will be incurring regardless of what happens, and then what are the growth goals on top of that.

If you can create relationships between your variable costs, and your expected revenue, i. e. sales and marketing, we anticipate being about 8 percent of expected revenue. Thus, once we get an expected revenue number, we can then calculate an 8 percent of that figure for anticipated sales and marketing spend.

If you start to create relationships like that, it becomes a little bit easier to Budget out what your costs look like. Now, as we look at the forecasting side, you can use the budget as a baseline for your rolling projections. However, based on the calculations that you have in the budget, they should be continually updating on a month by month basis.

Based on the actuals that were incurred in that given month. So then what we want to do is we want to compare the actual results on a month to month basis against what was budgeted and then against what was forecasted on a regular basis. So we have three lines, the actual, the budgeted, and then the forecasted.

To help us understand, again, how do we Interpret the initial assumptions that we had in the budget, what's actually happening, and then how do we modify that for the future? Those three inputs will give you a really good perspective on how to start doing that. Now you can just simply start by exporting your QuickBooks P&L, and that gives you all your chart of accounts, a month to month look of what's happening.

You can expand those columns to share more months and to start updating those in Google Sheets and Excel, and just start really simply creating. Creating calculations based on what happened There are a lot of simple FPNA tools that can help with those things like fathom or reach or mosaic.

There's a number of options out there. Now, some of those do require learning curve and just navigating Excel and Google sheets does require learning curve, but. But you can really start to put pen to paper to understand how do we get started here. So one thing that we often see that is very challenging in these rhythms is that most folks will treat a budget as a set it and forget it document.

They'll set a budget in Q4 for the following year, and then it just goes completely out of the window once mid January rolls around. The other thing is that we see a forecast in place, but it's actually not updated with real data. And so if you have an Excel based Forecast. And you're not actually updating that with actuals.

It's going to be really difficult to stay up to date on what's happening in your business and what decisions you should be making relative to what you expect in the future. A lot of tools out there can allow you to easily port in actual data to forecast upon that. The last thing that we fail to see is scenario planning in the forecasting rhythm.

So what is the best case look like? What is the worst case look like? And then what does the base case look like? If you don't have scenarios, that's okay. It's not the V1 of a forecast that we're looking for here, but But if you can start to create parallel situations in which you would be making different decisions based on different outcomes, having the base best and worst case is a really good starting point.

And that can just be a function of having three separate tabs in a forecasting plan. Now, as we start to set up a basic budget and rolling forecast day, the goal is to keep it simple. We don't need to overcomplicate it. We just need to look for directional accuracy that helps us understand how to make decisions in the business.

If we can start to get into a rhythm of reviewing that on a On a monthly basis and adjusting the forecast on a regular basis. Let's start with quarterly. We're doing pretty good. If you can look at your last three months of revenue and figure out like how close were we to our budget? How close were we to our anticipated forecast?

You can then start to better understand what adjustments need to be made to the forecast moving forward. I really hope that this helps give some clarity around the difference between budgeting and forecasting and hopes to instill helps to instill a of embedding that into your financial.

Understanding and planning for your business so that you can build a more profitable, sustainable, and a business that drives better outcomes for you, your team, and your customers.