While budgets are usually made for an entire year, forecasts are usually updated monthly or quarterly. The company uses the budget to guide it in its financial activities. Therefore, the budgeting process takes time to complete. It is usually not conducted solely by one department, say, the finance department, because it requires input from other departments in order to come up with a holistic and detailed report. Budgeting involves creating a statement that consists of numerous financial activities of a company for a specific period, such as projected revenue, expenses, cash flow, and investments.However, the two are distinctly different in many ways. One thing that is definitely true is that budgeting and forecasting are both tools that help businesses plan for their future. It is a planning tool that enables businesses to chart their next moves and create budgets that will hopefully cover whatever uncertainties may occur. Basically, it is a decision-making tool that helps businesses cope with the impact of the future’s uncertainty by examining historical data and trends. Forecasting refers to the practice of predicting what will happen in the future by taking into consideration events in the past and present.
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