What are the differences between planning, budgeting and forecasting?

Planning is mainly about laying out overall organizational goals, strategy & necessary action plan that we need to take to achieve those goals.

Budgeting caters accountability & making sure we have enough money to manage all operations once planning has been completed. It also measures performance & company goals throughout the process.

Forecasting is all about prediction of future outcomes for upcoming months or years. Here we make timely decisions if we face any shortfalls against target, or if we're successfully achieveing profits, then project future profits. Making short & long term goals that can be tracked. 

 

Planning, budgeting and forecasting are all pieces of the financial management puzzle and together they can help form, analyse and evaluate financial performance and suggest problems to solutions. Planning

Planning is usually the first step in setting up a small business, and continues to be used as things progress. Planning could be something simple like building your daily agenda, or long-range enough to envision where you want to see your business in five or 10 years. Some planning is done by the seat of the pants, with little more raw data than your vision for the business. But as more information is available, the planning focus sharpens. Once the business idea takes shape, you might put together a more formal business plan to outline who your customers are, where you plan to make your money and how you intend to attract new customers.

Budgeting

Businesses set up how they will spend money with a budget. Budgets determine how existing financial resources are allocated. Budgets are usually set by how previous money was spent and expected income. The budgets often dictate how much is spent toward payroll, supplies and advertising expenses. Budgets tend to be closer to real-life action. While a plan or forecast can be wrong, an error-ridden budget invites financial disaster. Most companies set their budgets at the beginning of a calendar or fiscal year, and many leave some room for adjustment as revenues increase or decrease.

Forecasting

Once you get an idea of how much money you're making through your business, you can start long-term forecasting to determine what you might be able to do in the long term. A forecast is based on past and current business numbers. Forecasts are rarely set in stone, though. The forecast might be inaccurate, so it would be a mistake to base a budget on that. Far from being an exercise in futility, though, forecasting acts to serve as a basis for further planning

In Conclusion, Budgeting, planning and forecasting are all useful tools when you run a business. It takes a plan to get things off the ground. The plan continues to serve through the life of the business. Budgeting works close to the operating side and determines how things will run in the present and immediate future. Forecasting, while every bit as uncertain as the future, can help clarify things far in advance.