34 Budgeting and forecasting
‘We didn’t actually overspend our budget. The allocation simply fell short of our expenditure.’
Keith Davis, former American football player
In a nutshell
A budget is a financial and operational business plan. It is used to implement an organisation’s objectives by setting financial targets.
A forecast is an estimation of an organisation’s financial performance for specific periods in the future, for example the final quarter of the year.
Budgets are usually set annually in advance of a financial year, whereas forecasts are typically prepared more frequently and a number of times during a financial year.
Management accounts (see Chapter 31 Management accounts) will usually include a report of actual performance ...