Updated: Jun 22, 2021
Accounting 101 with Kaz
What’s the difference between a forecast and a budget? ⠀⠀⠀⠀⠀⠀⠀⠀⠀
Do you know? ⠀⠀ Do you care? Well I totally care. ⠀⠀⠀⠀⠀⠀⠀⠀⠀ I love this stuff.
So I’m going to tell you in Kazza’s terms.🤩 ⠀⠀⠀⠀⠀⠀⠀⠀⠀ A BUDGET sets out the financial results you want to achieve in your business. It’s usually developed at the start of the year and might be updated half way through the year in response to changes in your business situation. ⠀⠀⠀⠀⠀⠀⠀⠀⠀ A FORECAST, on the other hand, is a dynamic record of the expected financial results your business will achieve. It might be quite different to a budget, because COVID-19 came and blew your budget out of the water for example. ⠀⠀⠀⠀⠀⠀⠀⠀⠀ So a budget is your target.
And a forecast is what will likely happen. ⠀
It's good practice to have both a budget and a forecast. This will prevent you blindly hustling away all year in your biz not knowing what financial result you want or what result you’re likely to end up with.
Moneysmart.gov.au hosts a great budget planner that anyone can use..... ;)