Budget Re-forecasting

Brian D

Hi Everybody,

Please could somebody tell me what actually is involved and the processes when we do a budget reforecast and why do we do this exercise?


Many thanks,
Brian

Bowdent

There could be a number of different things involved in doing it, but generally you produce a budget for the year based on various assumptions and information available to you at the time.

As we all know, things change, and you may want to re-jig the budget in line with what you know today.

As an example, if you're an airline, and when you produced a budget, you had two planes, and didn't intend on changing that all year.
Six months down the line, someone invests in your business and buys you two more planes giving you four. There's no point in reporting actual income and expenses against the original budget as things have changed dramatically. Therefore a re-forecast is required. You re-forecast the budget based on having four planes for the remaining six months. So you forecast going forward what your income and expenses (amongst other things) will be, or you think they'll be based on having four planes.

Bit of a rubbish example, but the principal of it is right.

Brian D

Ok thank you for your help.
Brian

Paul C

We have yearly budget plans but do fresh forecasts most months. Comparing actual expenditure and income for the year to date, e.g. 4 months, compared to the budget year to date e.g. 4 months. This gives material differences between what we expected ( budgeted ) and what has happened so far.

We then link into budget holders and query why there might be differences. If they are genuine under or overspends we report the overall picture to Senior management teams monthly or quarterly. Budgets are then revised once a year for the new financial year. We have to do a year end report on what has happened over 12 months compared to budget but also compared to what we forecast. We have performance targets where our forecasts must be a certain % or less away from what actually happened come year end.

Not sure if that helps......