Financial Modeling for Startups and the Difference Between Budget and Forecast

Описание: A financial model is a powerful tool for startups to accelerate their growth, and successful financial modeling requires effective budgeting and forecasting. That's why it's important for founders to understand the difference between budget and forecast.

Financial modeling can prove out qualitative strategic plans, especially when resources are limited — as is often the case with startups. The key is to create your financial model in advance, to provide the data and insights you need for planned strategic growth and dynamic decision-making.

In this video about financial modeling for startups, York IE CFO Janelle Gorman explains the difference between budget and forecast and why you need both.

Sometimes the terms budget and forecast are used interchangeably, but they're actually two different things. Both are important financial modeling tools for startups, but a budget is static, while a forecast is dynamic.

A budget is typically generated before the start of the year. It can remain static, or it can be updated once or twice throughout the year. It's used as a financial modeling tool to measure success and promote accountability and predictability.

A forecast, on the other hand, is dynamic throughout the year. It's typically updated monthly or quarterly and maintained for a rolling 12-month period — not just reflecting the current fiscal year you're in. The forecast is used as a financial modeling tool to guide business operations and make decisions around mergers and acquisitions, pricing strategies and more.

It's crucial to understand the difference between budget and forecast, but they aren't the only types of financial modeling for startups. You'll also learn about quota model and compensation planning, bookings and revenue models and scenario planning.

Learn more about financial modeling for startups: https://york.ie/blog/budget-vs-foreca...