budgeting-forecastinglisted

# Budgeting & Forecasting Turns targets into executable budgets with honest variance tracking and rolling recalibration. ## Methods * **Top-down**: management targets are cascaded down to units — fast, but may be unrealistic on the ground. * **Bottom-up**: estimates from units/customers are rolled up — more accurate, slower; choose based on scale. * **Rolling forecast**: quarterly revisit instead of once a year — suited to fast-changing SMEs. ## Variance Rules * **Variance = Actual − Budget**: label favorable (+) / unfavorable (−). * Review threshold: variance ≥ 5% on any significant line item → require root-cause analysis (volume? price? timing?) before revising. * Do not revise the budget mid-period just because of underperformance — revise the forecast separately. ## Scope & Safety * **Use for**: annual planning, cost control, communicating targets to investors/banks. * **Do not use for**: a basis for profit recognition (budget ≠ actual results), or revenue claims to third parties. * Assumptions (price, volume, inflation) must be stated explicitly and sensitivity-tested. * Historical vs projected figures must be labeled differently in all documents. ## Worked Example Input: sales budget 500 million/month, actual 460 million → variance −40 million (−8%, unfavorable). Analysis: volume dropped by 60 million but price rose 3% (+20 million) → volume is the main driver; check competition & seasonality before revising the new quarterly forecast: 470 million/month.