# Budgets versus forecasts

A clear understanding of budgets and forecasts is useful to new users of the Budgets and Forecasts module, whether you’re a budget owner managing the process or a contributor in the workflow.

## Budget <a href="#overviewofbudgetsversusforecasts-budget" id="overviewofbudgetsversusforecasts-budget"></a>

A budget quantifies expected performance and provides a detailed representation of the business's future goals. It is updated once a year. If adjustments are required during the year, the budget transitions into a forecast. Budgets allow businesses to measure performance by comparing their budget values to actual results.

## Forecast <a href="#overviewofbudgetsversusforecasts-forecast" id="overviewofbudgetsversusforecasts-forecast"></a>

A forecast combines the actual results from past months with projected values for the remaining period. It is regularly updated throughout the year. Forecasts are forward-looking, allowing businesses to estimate sales or profit for future periods and understand their current direction.

## Budget versus forecast <a href="#overviewofbudgetsversusforecasts-budgetversusforecast" id="overviewofbudgetsversusforecasts-budgetversusforecast"></a>

Whereas the budget reflects where the company *plans to go*, the forecast reflects where the company is *actually heading*.

## How they work in Budgets & Forecasts <a href="#overviewofbudgetsversusforecasts-howtheyworkinbudgets-and-forecasts" id="overviewofbudgetsversusforecasts-howtheyworkinbudgets-and-forecasts"></a>

In Budgets & Forecasts, you start with a budget workbook and convert that into a separate, linked forecast workbook.

* The new forecast workbook integrates the budget and actual data in one place, allowing you to easily see how your business is trending against the budget. You can then adjust for market conditions and more accurately predict future results.
* The budget workbook continues to exist, allowing you to compare changes you make in the forecast to the original budget values.

In the forecast, you’ll see the actual data up to a certain point, followed by your budget data in the remaining period. This data continues to update as time progresses. For example, suppose you budget for a 12-month calendar year, and you're budgeting at the end of January. In your forecast, you’ll see your actual results for January plus the 11 remaining budgeted months. When budgeting in June, you’ll see the actuals for 6 months (January to June) plus the remaining 6 months' budget values.


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