What is Budgeting & Forecasting?
Setting financial targets for a future period and continually updating expectations as conditions change.
Definition
Budgeting is the process of setting a financial plan, usually annual, that allocates expected revenue and expenses across the organisation as a benchmark for performance. Forecasting updates the outlook throughout the year based on actual results and changing assumptions, often as a rolling forecast that always looks a set number of periods ahead. Together they help leaders allocate resources, set targets, and anticipate cash and profit. Comparing actuals to budget and forecast (variance analysis) is a core part of monthly performance reviews.
How Budgeting & Forecasting Works in ERP
An ERP lets finance build budgets at the account and dimension level, load them against the general ledger, and report actuals versus budget versus forecast in real time. Forecasts can be revised periodically, and driver-based or spreadsheet-style inputs feed the model. Many ERPs integrate with dedicated planning tools for more sophisticated scenario modelling while keeping a single set of actuals.
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Frequently Asked Questions
What is the difference between a budget and a forecast?
A budget is a fixed plan set at the start of a period that represents the targets the organisation commits to. A forecast is a frequently updated estimate of where results will actually land, revised as real data and new assumptions come in. The budget stays as the benchmark while the forecast tracks the moving reality. Comparing actuals to both shows how performance is tracking against the plan and the latest expectation.
What is a rolling forecast?
A rolling forecast continuously extends the planning horizon, so as each month closes another future month is added, always keeping a constant window such as the next twelve or eighteen months in view. This contrasts with a static annual budget that becomes stale as the year progresses. Rolling forecasts help organisations respond faster to change. ERPs and planning tools support them by refreshing actuals automatically and letting planners re-forecast forward periods.