Budgets and forecasts - different names for the same thing?

Is there a difference between budgets and forecasts or is it just two names for the same thing? At Lantern Partners we think they’re different and here’s why:

Budgets?are traditionally constructed once a year and become your yardstick to measure progress against.?It gives you clear goals in a fixed framework, but in today’s constantly changing environment, it can mean it’s quickly outdated.?However, there are scenarios where they are still useful:

• Gives you a clear target to measure progress against
• Banks require a budget as it gives them an insight into the predicted performance of a business. This is an important factor when deciding whether they are confident to provide funding or not.

Forecasts?on the other hand are updated on a rolling basis as factors change and incorporate actual results as the year progresses.?This allows businesses to have a more realistic view, particularly in the short term of 6-12 months.?So why do we believe forecasts are important?

• They are primarily an operational tool that allows you to see the impact of actual results and facilitates appropriate decision-making.
• They provide businesses with an insight into the impact of business decisions well in advance as well as detail into the future impact of the business.
• They provide businesses with an opportunity to test different financial strategies before implementing them and review future cashflow requirements

There are three main types of forecasts you can do for your business:?

1. Cashflow – if you only do one do this one
2. Profit and loss – regardless of cash inflows and outflows allows you to see consistently how profits are being made, which is important for long term sustainable growth
3. Three-way forecast – this incorporates your profit and loss, cashflow and balance sheet and is typically what a bank or investor needs

We ran a session late last year on “Forecasting for Your Small Business”, if you want a copy of the recording?contact us?and we’ll send you a link.?

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If you want to chat with a Lantern Partners team member about what you need to start forecasting for your business, or why it could be beneficial, send us a message, and let’s start a conversation.?

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Finally – Don't miss your opportunity to work with Lantern Partners 1:1. We only have a few spaces left.

We want to help your business be prepared for FY24. Which is why we've created availability to work 1:1 with your business for a whole day.

Where: In person in Sydney, Brisbane, or Melbourne (contact us if you are outside these cities)

When: Book your spot (we have limited availability) between now and 30 June!