Budgeting and Forecasting Services

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Businesses exist to make an impact on their customers, community, and other stakeholders—and to earn a profit. To this end, few processes are more essential than budgeting and forecasting, meaning that the rest of your business can’t serve your customers without getting your money right. In this guide, we cover essential aspects of this process, such as:

  • Budgeting and forecasting best practices
  • Budgeting and forecasting tools for a small business
  • Best budgeting and forecasting services

According to Forbes, 38% of small businesses fail because they run out of capital. We’re setting out to lower that number. Let’s dive into the ins and outs of budgeting services, business performance, and forecasting solutions!

What Is the Budgeting and Forecasting Process?

The budgeting and forecasting process is a set of steps companies can take to optimize how they allocate their financial resources. Ultimately, engaging with budgeting and forecasting should prepare your business to deal with challenges and opportunities in both the short- and long-term. This process is made up of three steps:

  1. Planning: Leadership should set goals for the next three to five years. Planning sessions will allow for the development of a unified vision and expectations. The direction decided upon in this step will influence budget allocations in step two. 
  2. Budgeting: This is where goals meet actual performance. During budgeting, leadership needs to allocate resources to different departments and initiatives. Room should also be added for unplanned expenses in annual budgets, such as broken equipment or the need to hire a replacement. Every month, departments should compare their expenses to their budget to help allocate resources more effectively in the future. 
  3. Forecasting: Using historical data, companies can predict future revenue, expenses, and market trends. As a practice, forecasting is more flexible than budgeting. While a budget requires companies to work within a fixed amount of resources, forecasts can be adjusted to reflect new data.

While these steps are split into three different categories, budgeting, and forecasting aren’t always this linear. During any business cycle, there will be a push and pull between planning, budgeting, and forecasting. For example, changing marketing trends found during forecasting can impact your company’s three to five-year plan. With changing goals, budgets will also need to adjust to support the highest priority initiatives.

What Is the Budgeting and Forecasting Process

While this process seems essential for every business, many companies operate with a small or non-existent internal finance team. Without professionals dedicated to planning, budgeting, and forecasting, a company will likely move forward without a clear direction. If this sounds like your organization, it’s time for a change. Contact our team at Milestone to see how we can help turn your finances into a competitive advantage.

Why Do We Need To Plan Budgeting and Forecasting?

Money makes the world go ‘round—especially the world of business, which is why the importance of budgeting and forecasting can’t be overstated. In short, companies with an effective budgeting and forecasting process spend their resources more efficiently than those without. Dollar for dollar, businesses with a plan will be able to seize more opportunities and soar past the competition.

Why Do We Need To Plan Budgeting and Forecasting

The benefits of proactive budgeting and forecasting are similar to those of data-driven decision-making, which is exactly what this process enables. Specific benefits include:

  • Responding to challenges and opportunities as they arise
  • Receiving real-time feedback on the financial impact of organizational changes
  • Improving synergy between financial goals (like revenue generation) and other organizational goals (such as brand recognition)
  • Increasing the accuracy of financial predictions
  • Enhancing insight into potential financial roadblocks
  • Allocating resources more efficiently to pursue growth-oriented initiatives
  • Focusing decision-making on relevant data instead of assumptions
  • Developing evidence of financial success that can appeal to investors

As Benjamin Franklin once said, “If you fail to plan, you are planning to fail.” Charting a course for financial success starts today. Get in touch to learn how.

Who Is Responsible for Budgeting and Forecasting in Business

Who Is Responsible for Budgeting and Forecasting in Business?

An organization’s chief financial officer (CFO) typically leads the budgeting and forecasting process. The CFO operates as the budget owners and works with the rest of the finance team to forecast revenue and market trends, while other department leaders report budgetary needs to finance. The CFO also connects with C-suite executives or department leaders to create alignment between organizational goals and budgetary requirements.

What about businesses that don’t have a CFO? Small businesses and startups may not have the budget or need for a full-time CFO. Fortunately, alternatives exist. Fractional CFO services allow organizations to partner with a third-party provider to cover certain aspects of a financial executive role.

Companies can also leverage other support options, such as monthly accounting and bookkeeping services. At Milestone, these services can include managing:

Weekly Bookkeeping

  • Accounts Payable
  • Credit Card Purchase Transactions
  • Bank/Credit Card Reconciliations
  • Merchant Account Reconciliations
  • Payroll Journal Entry
  • Customer Invoicing
  • Deposit Posting

Monthly Accounting

  • Structured Month-End Closing
  • Balance Sheet Account Reconciliation
  • Customized Financial Reports

Analysis & Forecasting

  • Financial Review Meetings
  • Financial Reports and Management Dashboard
  • Financial Forecast and Real-time Updates
  • Cash-Flow Forecasting

These services aim to provide your team with the data and insight to make impactful decisions. Call us to see which services could benefit your business’s financial performance. 

Who Should Be Involved in the Budgeting Process?

The budgeting process should be holistic and include financial experts and leaders from each department who know what their teams need to succeed. Executive-level leadership members will play a significant role in planning, budgeting, and forecasting, but everyone in the company is ultimately involved. That’s because each employee knows what resources they need, and successful companies will want input on how to best enable their team members. Of course, feedback will often be filtered through managers before it gets to budgeting meetings.

Third-party services can also play an essential part in the budgeting and forecasting process. Often, gaps in this process exist because there aren’t enough resources to do it properly. However, organizations don’t have to let resource constraints get in the way of budgeting anymore. Monthly financial services allow your team to focus on what they do best while still providing a beneficial direction for your business’s financial future.

For example, working with a fractional CFO can provide expert leadership during the budgetary process at a fraction of the cost of a full-time CFO. You can also leverage weekly bookkeeping and monthly accounting services to gain valuable data and insight while easing the burden on the rest of your team.

If you’re ready for your business’s finances to work with you instead of against you, we’re here to help. Contact us today to get started.  

Is There a Difference between Budgeting and Forecasting?

Budgeting and forecasting are both parts of the same essential process, but they cover distinct goals within that process. Here’s the difference between budgeting and forecasting with examples:

  • Budgeting: During budgeting, the CFO and other departmental leaders allocate resources for varying purposes on a monthly and annual basis. Budgeting is a restriction put in place to ensure the organization can continue operating with its current pool of resources. For example, the marketing department of a company could receive an annual budget of $1 million. This money would cover the salaries of team members in that department as well as the costs associated with running marketing campaigns.
  • Forecasting: Forecasting is a predictive tool used to estimate the need and possibility of different budgetary configurations. By using historical data, leadership can forecast market shifts, revenue trends, and expected costs. Unlike budgets, forecasting figures are more flexible as time goes on because they are a reflection of what’s happening rather than a limit imposed on the company. For example, if, during forecasting, leadership determines that there’s a chance to break into a new market, they may allocate more resources to the marketing budget to pursue this opportunity.
Is There a Difference between Budgeting and Forecasting

Forecasting and budgeting go hand-in-hand when it comes to making the most of your business’s finances. At Milestone, we specialize in providing organizations with the data and insight they need to make the most out of their financial situation. Contact us today to learn more.

What Are the 7 Types of Budgeting?

The seven primary types of budgeting in business are:

  • Operating Budget
  • Financial Budget
  • Cash Budget
  • Direct Labor Budget
  • Static Budget
  • Capital Budget
  • Overhead Budget

What Is an Example of a Budgeting Process?

Let’s take a closer look at each of these examples of budgeting processes and what they’re used for:

Operating Budget

Operating budgets are useful for revenue-generating departments to see how much money they need to invest to achieve certain goals. For example, sales and manufacturing departments can use operating budgets to compare their expenses, like materials or travel, to the revenue that investment generated.

Financial Budget

Financial budgets take a holistic approach when evaluating your company’s financial picture. These budgets include: cash balance, capital expenditures, assets, liabilities, and investments. Since the total worth of the company is taken into account, financial budgets can be a useful tool for planning years into the future, especially for larger companies who have a lot of assets, liabilities, and investments to factor in.

Cash Budget

Cash budgets are similar to operating budgets, except they look at the whole business instead of just one department. Cash budgets also only consider liquid assets when comparing resources to expenses. Cash budgets are useful for ensuring that the business has enough resources to run on a day-to-day basis because they check if there’s enough money to cover wages, material, rent, utilities, and other recurring costs.

Direct Labor Budget

Direct labor budgets focus on a different type of resource: time. These budgets balance working hours and payroll expenses to ensure the business can afford to pursue a certain project. This type of budget is especially effective for projects that have measurable units of output, like manufacturing.

Static Budget

Static budgets provide a solid baseline for financial planning. These budgets track fixed expenses and provide a picture of what a business’s “normal state” looks like. As activity levels change, the business can compare costs and revenue to the static budget to see if they’re experiencing a typical or atypical business cycle.

Capital Budget

Capital budgets are used to prepare businesses for making investments. These investments can include buildings, properties, vehicles, equipment, and more. The purpose of these budgets is to ensure that investments are properly allocated for. For example, a new vehicle could support both sales and service, so funds would have to allocated accordingly.

Overhead Budget

Overhead budgets are designed to monitor overhead costs. These budgets should include costs associated with facilities, maintenance, research and development, IT, marketing and advertising, and administration. Overhead budgets can reveal over expenditures in areas that aren’t directly bringing in revenue.

If this seems overwhelming, it doesn’t have to be! Get in touch to learn about how your business can benefit from supporting financial services.

What Are 4 Methods of Budgeting in Business?

Budgeting methods in business typically fall into one of the following four systems:

  • Traditional Budgeting
  • Zero-Based Budgeting
  • Rolling Budgeting
  • Flexible Budgeting

The type of budgeting you use will depend on your business’s goals, needs, and philosophy. Here’s what makes each method unique:

What Are 4 Methods of Budgeting in Business

Traditional Budgeting

Traditionally, budgets are based on the previous year’s expenses. This budgeting system works for many businesses because it provides plenty of data to work with when planning for the coming year. Traditional budgeting is also useful for looking at the big picture when it comes to finances, which helps to identify challenges or misalignments from the previous year that need to be addressed when moving forward.

Zero-Based Budgeting

Zero-based budgeting takes the opposite approach as traditional budgeting. Rather than using the previous year’s figures as a starting point, this method allows each department to start from zero and “build up” their expenses for the year. Because zero-based budgeting starts with a blank slate, it can be useful for businesses that want to make significant changes or who are coming off an abnormal year.

Rolling Budgeting (Forecast)

Rolling budgets take a monthly or quarterly approach to budgeting instead of an annual one. This method is a great example of “you get what you measure.” Reviewing budgets monthly provides helpful insight for businesses operating in industries that experience rapid changes, such as retail. However, rolling budgets also tend to shift financial goals to short-term results rather than long-term.

Flexible Budgeting (Scenarios) 

Flexible budgeting is designed to reflect costs in real-time. This method takes changing activity levels into account, so it’s useful when tracking performance for a specific department or project. For example, the sales team could more accurately assess the ROI of an event by using flexible budgeting.

Not sure where to start? At Milestone, our experts are ready to help you find the budgeting method that’s right for you. Reach out to get started.

What Is Forecasting in Project Management?

Forecasting in project management involves looking ahead at what could happen while pursuing a specific initiative, including:

  • Outcomes
  • Costs
  • Challenges
  • Opportunities

Essentially, project managers use forecasting to prepare for any changes that may need to be made throughout the course of the project, whether that means changing direction, increasing budget, or another adaptation.

Financial projections are especially important for project management because they help show you whether a not a project will be worth the investment. Lead your team in the right direction with help from Milestone’s analysis and forecasting services.

What Is Budgeting in Project Management?

Budgeting in project management allocates resources based on the forecasted costs for completing a project. Exact budgeting methods will vary depending on the nature of the project, but direct labor and operating budgets are often useful because they take the variability of wage and material costs into account.

The duration of the project will also impact the budgeting method used. Short-term projects can benefit from the responsiveness of rolling and flexible budgets, while traditional budgeting can compare larger and longer-term projects to the company’s overall financial situation.  

How To Do Budgeting and Forecasting

Your business’s budgeting and forecasting process should include the following:

  • Realistic Expectations: It’s better to have too much money left over than too little, so don’t let ambition carry your business into tricky financial situations.
  • Contingency Planning: Life rarely goes to plan. Sometimes, things go wrong, and other times, things just go differently than expected. Add some extra room to your budget for the unexpected.
  • Accurate Data: Your decision-making can only be as good as the information you have. Update information regularly to improve forecasting and budgeting.
  • Short- and Long-Term Goals: It can be tempting to only focus on short-term results, but think about how budgetary decisions will impact the business in the long run.
  • Continuous Improvement: Monitor your budget and compare it to forecasts. If you’re expecting changes, adjust your budget accordingly.

What Is Budgeting and Forecasting Software for a Small Business?

Budgeting and forecasting software for small businesses helps track and analyze data. With the right applications, your team can more accurately (and easily) record expenses, compare costs to budgetary options, and see how accurate your budgeting methods are.

When it comes to finding the right budgeting and forecasting software, the options are seemingly limitless. Contact us to learn more about which applications can help your business succeed.

Turn Financial Planning and Data into a Competitive Edge with Milestone

The best budgeting and forecasting services for a small business turn numbers into action. At Milestone, that’s exactly what we’re equipped to help you do. Our team is ready to support your financial forecasting and budgeting so you can get back to doing what you do best! We offer:

Don’t leave money on the table. Contact us today to get started!

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