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This is the third in a series titled Ask My Accountant, where Baldwin CPAs Elevate team is breaking down your top questions. Follow the series to get answers to your key questions. If you have a question that you would like answered, leave it in a comment below!
A budget is a financial plan that outlines what a business expects or wants to achieve over a period of time, usually a year. It sets targets for revenue, expenses, profits, and cash flow, helping business owners establish goals and measure performance.
A forecast is an updated estimate of what is likely to happen based on current information and trends. Unlike a budget, forecasts are adjusted throughout the year as sales, expenses, and business conditions change.
When making future decisions, a forecast is generally more useful because it reflects the most current outlook for the business. Whether you're considering hiring employees, purchasing equipment, or managing cash flow, a forecast provides a more realistic picture of where the business is headed.
The best approach is to use both. Think of a budget as the roadmap and a forecast as the GPS. The budget sets your destination, while the forecast helps you adjust your course along the way. By comparing your forecast to your budget, you can make better-informed decisions and respond quickly to changing business conditions
This article was written by Sharon Jessey. Sharon is an Accounting Specialist I with Baldwin CPAs. For more information on the support Baldwin CPAs can provide you, contact sharon.jessey@baldwincpas.com.
