Budgeting Forecasting

Budgeting & Forecasting

Create and manage effective budgets and financial forecasts.

Budgeting Approaches

| Approach | Method | Best For |

|----------|--------|----------|

| Incremental | Last year + X% | Stable organizations |

| Zero-based | Build from scratch each period | Cost optimization |

| Activity-based | Cost per unit of activity | Manufacturing, services |

| Rolling | Continuous 12-month outlook | Fast-changing environments |

Zero-Based Budgeting Steps

• Identify all activities and their costs
• Evaluate each: does it create value?
• Rank by priority/cost ratio
• Fund top priorities within budget constraints
• Cut or optimize low-value activities

Forecasting

Rolling Forecast Model

# Structure
- Historical data (12-24 months)
- Current pipeline and commitments
- Leading indicators (traffic, leads, bookings)
- Economic assumptions
- Scenario overlays (best/base/worst)

Variance Analysis

| Variance | Cause | Action |

|----------|-------|--------|

| Revenue ↑ | Volume or price increase | Sustain driver or reinvest |

| Revenue ↓ | Volume or price drop | Investigate root cause |

| Cost ↑ | Variable or fixed increase | Optimize or renegotiate |

| Cost ↓ | Efficiency or lower demand | Validate sustainability |

Scenario Planning

• Base case: Most likely outcome
• Upside: +20% revenue, what would we invest in?
• Downside: -20% revenue, what would we cut?
• Each scenario has specific triggers and action plans
• Review scenarios monthly against actuals