Compare budget and forecast.

The major differences between budget and forecast are as follows −

Budget

• It’s a business plan made by management for future with quantitative.

• It shows what a company want to achieve during a period of time.

• Generally, it is short term.

• It is static in nature.

• It is used as tool to manage operational performance in short term.

• It sets the targets.

• It is updated annually.

• There is variance analysis.

• Covers large areas like costs, revenue, profits etc.

• Almost everyone will aware of budget.

Forecast

• It is based on historical data; future trends can be estimated.

• It tells about what a company will achieve in a specified period.

• Generally, it is long term.

• It is more flexible.

• It is used as input for preparing budget.

• It has no targets.

• It is updated at regular intervals of time.

• There is no variance analysis.

• It is very narrow and covers only revenue and expenses.

• Only management and team leaders will be aware of forecast.