Budget vs forecast:

What is the difference and how do they interact?

It often requires a great deal of focus when planning for the company:

“We need a forecast for this and a budget for that.”

But what is actually the difference between a budget and a forecast? We will try to express that in this article. We will also give you our take on why you should operate with both forecasting and budgeting.

Budgeting and forecasting are both important methods for financial planning.

Essentially, the key difference is that in budgets you put figures on what you want to achieve, whereas the forecasting predicts what you expect to achieve.

The following describes the overall differences between a budget and a forecast.




The budget describes what the company wants to achieve in the budget period.

The forecast tells what the company expects to achieve in a certain period.


Many companies make annual budgets. Others operate with rolling budgets – for example quarterly.

A forecast is typically updated on a rolling basis – for example monthly or quarterly, dependent on the operational function of the forecast.

Operational function

Budgets form the financial frame of the company and follow-up is made successively or annually.

Forecasts are mostly used on an operational basis – for example for adjustment of stock and production plans.


The budget is static and hardly ever changed, unless operating with budget correction or rolling budgets.

The forecast is dynamic. It is typically changed on a weekly or monthly basis as real-time data ticks in with new insight.

Value creation

The budget helps define a general financial frame for the budget period that the individual functions can aim their efforts at.

A forecast helps streamlining the financial and operational planning, allowing the company to optimize business.

Your forecast is key to data-driven planning

Even though the budget might be prevalent in many companies, the forecast has the potential to gain significance for the business.

Forecasts are namely made based on the current situation, which is successively updated and adjusted.

It provides an actual insight into the nearest future of your business. And with that knowledge in hand, you can plan your activities within purchase, sales, operation, and production.

Does that mean I can work with both budget and forecasting at the same time?

You sure can.

And we even recommend it, as the two planning models each have their own strength.

The budget creates the financial targets for your strategic initiatives, whereas a rolling forecast can help you plan the operational activities.

For you as the financial controller it provides a strong hold of the financial management of the business, as you establish a distinct link between strategy, financial insights, and operational activities.

Moreover, it is an extremely agile solution, due to the successive adjustment of plans and efforts based on the predictions of the forecast.