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What is the Difference Between a Budget and a Rolling Forecast?

Many small and medium-sized business CEOs start the 2025 budgeting process after the summer holidays. The budget is a legendary tool for planning the company's growth, cash flow, and finances.

Regardless of the hours spent on the budget, predicting 12 months ahead is difficult. However, you can get more out of the budget by comparing it to the results.

Comparing and analyzing the budget with actual results helps the company move promptly in the right direction. Creating one or more rolling forecasts to prepare for different scenarios can be beneficial alongside the budget.

The Budget Tells Your Company's Full-Year Targets

The budget is the company's goal for the financial year. The CEO leads the budgeting process. The budget defines the key objectives and financial indicators the company aims to achieve in the coming financial year.

The budget is often compiled in Excel, where the CFO gathers sheets for sales, personnel, and procurement targets for the next financial year. The budget determines the company's annual bonuses, investments, and financing.

The board approves the budget, meaning the company's management has a framework within which to operate. The budget's weakness from a business perspective is that it is created at one point in time for the upcoming financial year, making its predictability weaker towards the end of the fiscal period.

Actual Results are Facts

Actual results refer to realized financial indicators showing how the company has performed. Results can only be analyzed once you have data from the completed period.

Variations between budgeted and actual figures are perfectly normal. However, a significant or consistent negative deviation indicates a need for immediate response. A budget has no value if changes are not reacted to. The comparison aims to identify the differences and understand the root cause of these changes.

A Rolling Forecast is a Management Tool

Many SME CEOs maintain a rolling forecast alongside the budget. A rolling forecast is a management tool with a forecasting period ranging from three months to 12 months, depending on the business model. When the rolling forecast is combined with actual results, the management team gets an estimate for the entire financial year's results.

A rolling forecast also provides a good basis for building different business scenarios.

For example, scenarios can assess the company's results and cash flow if sales or personnel costs increase by 20% or decrease by 15% from the current level or what the cash flow or financial indicators would look like if the company invests in a new product. With these scenarios, the company's management is prepared for different alternatives.

With riskrate, you can forecast the future like never before: choose from riskrate automatic forecasting models, make modifications, or start from scratch.

The Most Important Thing is to Get Started

Creating a budget for the first time is the most challenging because there is no data and no point of comparison. However, the most important thing is to start immediately: you can begin by listing your company's income and expenses for the upcoming months in Excel or easily download last year's actual in seconds with riskrate. Budgeting and forecasting teach much about the business and help you address deviations immediately. As your company grows, you will also have more data, which can help you refine your forecasts. When creating a new budget, remember past variations to improve forecasting accuracy each time.

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