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Financial planning, budgeting and forecasting are complimentary financial tools used by organization leaders to map out and execute their short-term and long-term goals. A plan provides the framework, a budget provides accountability and allocation of cash, and a forecast projects the financial future of the organization.
Financial Plan
- The financial component of the organization’s business plan
- A high level and less detailed guide that focuses on the end rather than the means
- Created top-down to allow for different scenarios; remains unchanged
- Challenge: difficult to predict and define the business in the long term
Budget
- Details how the business plan will be executed by month
- Focus is on cash position, includes expected revenues and detailed expenses by line item
- Follows the accounting framework of the organization, but may also include a cash flow
- Approved and set prior to the start of the fiscal year, unchangeable
- Reviewed monthly to provide accountability for departments and leaders
- Challenge: large time involvement to create a detailed budget, static
Forecast
- The forecast builds on the budget and includes updates for organization information and market conditions (e.g. pandemic, bank failures, change in economic outlook)
- Adjusted as new information becomes available, outlook may go beyond current year
- Challenge: greatest value comes from staying on top of the forecast and updating frequently
| Plan | Budget | Forecast | |
|---|---|---|---|
| Purpose | Link between operational and financial goals | Track performance against target, cash allocation | Updates for actual data and current market conditions |
| Timeframe | 3-5 years | 1 year | 1-3 years |
| Changeable | Static | Static | Update |
CBM’s outsourced accounting and advisory group works with organization leaders to help plan and execute their business goals through financial plans, budgets, and forecasts…
Please contact Dominick V. Bellia via our online contact form for more information.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.
