January 31, 2025
3
MIN READ

Planning, Budgeting, and Forecasting: How CFOs Can Set, Strategize, and Forecast the Future

Finance

Master the differences between planning, budgeting and forecasting, and discover how they drive financial success.

by
Stephen Boachie-Mensah

Three tools can shape your company’s future financial success: planning, budgeting, and forecasting. 

Think of them as the trifecta of financial management. It’s a little like prepping for a road trip. You decide where you want to go and how to get there, all while predicting roadblocks before you embark.

In this article, we cover the differences between planning, budgeting, and forecasting. We explain what each of these financial management tools are, their differences, and why they’re important for finance professionals. 

Let’s start with planning. 

What Is Planning?

Planning sets your business’s financial goals for the next one to five years. It’s a roadmap that states where your business stands financially, outlines your overall direction, and helps you carve out your business’s priorities for financial success. 

Planning helps decision-makers think strategically about long-term goals.

Whether your organization plans to enter new markets, launch new products, or increase market share, think of planning as your first move—letting you set the coordinates before you continue full speed ahead.

What Does Planning Include?

Financial planning is a comprehensive and structured process that includes smaller tasks. Make sure to include as much detail as possible. Otherwise, you risk missing blind spots and misalignment with your business's key financial objectives.

Your planning should include:

  • Summarizing costs and investments
  • Revisiting your business's vision and objectives 
  • Quantifying resources such as labor and materials
  • Assessing your company's and stakeholder’s priorities
  • Establishing short-term and long-term periods to actualize your plan
  • Finding potential risks and roadblocks that can thwart your business
  • Identifying resources your business needs in order to achieve said objectives and priorities

What Is Budgeting?

Budgeting is the process of outlining expectations for your company’s upcoming financial period and allocating resources to achieve them. You can budget annually, quarterly, or even monthly. 

Budgeting breaks down how to achieve your objectives through detailed and quantified assessment. By analyzing expected revenue and creating a detailed assessment, you can gain greater financial control over your resources. While planning is strategic and offers a bird’s eye view—budgeting is granular, and helps you get into the nitty-gritty of financial management.

Did you know? 👛 Budgeting comes from the old French word “bougette” which means “small purse.”

What Does Budgeting Include?

Depending on your organization, its needs, industry, and expectations, budgeting can involve many interconnected tasks. However, there are a few essential elements your budgeting should include:

  • Revenue projections: Estimating the income from your business's sales, services, or investments.
  • Expense planning: Categorizing fixed and variable expenses, accounting for operational costs and one-time costs, and prioritizing spend to align with your company’s goals. 
  • Goal assessment: Setting targets like profitability, cost reduction, or investment while ensuring your budget can meet financial needs and objectives.
  • Cash flow management: Includes planning for cash inflows and outflows, and ensuring reserves can cover your operational needs.
  • Resource allocation: Assigning budgets to departments, initiatives, and projects within your organization.
  • Performance monitoring: Establishing KPIs to track your budgeting progress, success, or failure.

What Is Forecasting?

Financial forecasting predicts your company’s financial outcomes based on historical data, market trends, and conditions. Finance professionals will also typically adjust their predictions to reflect changes in the business environment or operations for an up-to-date and accurate forecast.

Whether it’s for product production or forecasting for SaaS costs, this financial management tool gives you the high-level information your business needs to consider the big picture and how to grow within it. Think of forecasting as your fiscal crystal ball, letting you peek into your company’s financial future, assess market demand, and help you brace your business for financial roadblocks. 

Keep in mind, forecasts can’t always predict financial outcomes perfectly. Black swan events, a term popularized in the book of the same name by statistician Nassim Nicholas Taleb, refers to rare, unpredictable, and high-impact events that often defy expectations. Such events can change the market rapidly, and by extension, your revenue.

What Does Forecasting Include?

To ensure your financial forecasts are accurate, you’ll need to include several key components, such as:

  • Historical data: Past performance metrics including revenue, expenses, and sales volume. 
  • Market data: Industry and economic trends that can potentially affect your financial goals. 
  • Other variables: These can affect your objectives such as sales performance, production capacity, competitors, and pricing strategy.

By focusing on these broader categories, a financial forecast gives you strategic insight to inform your budgeting and check whether your original financial plan is on track.

Cledara tip: Having trouble tracking and managing finances? Planning, budgeting, and forecasting software can help you set long-term objectives, allocate resources automatically, and predict future outcomes with analytics. 

Planning vs Budgeting vs Forecasting: What’s The Difference?

To help you better understand the differences between a plan, a budget, and a forecast, we’ve compared each of these financial management tools side by side.

Planning Budgeting Forecasting
Purpose Define the organization's overall financial goals and priorities Ensure effective allocation of resources for achieving specific goals Predict financial outcomes using historical and current data
Focus Broad, strategic objectives Tactical and financial details for achieving long-term objectives Dynamic, adaptable projections
Detail level High-level and strategic Precise and granular Trend-focused, adapting to real-time data
Time frame Long-term, often between one to five years Short-term, typically a fiscal year, quarterly, or even monthly Can be short-term or continuous
Status Static but reviewed Semi-static and allows for adjustments Dynamic and often updated
Answers the question… What are our goals and how can we achieve them? How will we allocate resources to achieve our goals? What is likely to happen, based on current trends and data?
Example use case Expanding into a new market Setting an annual sales budget Updating revenue projections based on market changes

Kevin Shahnazari, Founder and CEO of FinlyWealth emphasizes the static vs dynamic difference between budgeting and forecasting:

“The primary difference between budgeting and forecasting lies in their approach and flexibility. While budgeting is often static and based on predetermined goals, forecasting is dynamic and can be adjusted as new information becomes available. This adaptability allows companies to respond swiftly to market shifts, ensuring they remain competitive.”

Why Are Planning, Budgeting, and Forecasting Important?

Together, planning, budgeting, and forecasting define financial goals, create a roadmap, and predict challenges. Just like the three musketeers of financial management, they’re one for all, all for one—and that one is your organization’s financial success.

Other major benefits that monitoring these critical financial components provides include to help:

  • Get stakeholder buy-in for initiatives
  • Monitor performance more accurately 
  • Foster long-term financial sustainability 
  • Get support for strategic decision-making
  • Allocate resources efficiently and effectively
  • The ability to better manage and adapt to risks
  • Gain greater financial control over your company 
  • Facilitate strategic alignment between stakeholders

What does using this financial power combo look like in the real world? Let’s take a look at a planning, budgeting, and forecasting process example.

A Financial Planning, Budgeting, and Forecasting Example

Let’s say you’re a mid-sized SaaS brand ready to introduce a new solution. 

Financial planning would help you set a target like using your new software product to increase revenue by 30% in the next three years—ambitious, we know. To ensure you get there, you set yearly milestones, aiming to increase annual revenue by 10% each year. 

Budgeting would help you estimate and allocate resources to your required process to design, mass produce, market, and sell the digital product to your target audience.

Perhaps you allocate $50,000 to design,  $100,000 to initial development and testing, $30,000 to marketing, and another $20,000 to sales. You break your $30,000 marketing budget down further by allocating $10,000 of it to digital ads, $15,000 to PR campaigns, and $5,000 to influencer partnerships. 

Finally, you do a financial forecast by analyzing historical trends such as growth rates and comparing them to current market data. A best-case-scenario financial forecast shows that you stand to make $1 million in revenue, while a worst-case scenario puts your revenue at around $300,000.

However, you’re optimistic because financial forecasting has also shown you that there’s been a boom in demand for home-smart products—and it’s not blowing over anytime soon. 

The future looks bright, and you’re prepared for it.

Simplify finance management with Cledara

Planning, budgeting, and forecasting sets you up for financial success. With all three, you can decide the whats, hows, and what-ifs of your finances. If you’re a CFO, using all three for your financial management ensures you can make an impact and drive organizational success.

As useful as planning, budgeting, and forecasting are—they’re often resource-intensive to complete. Finance professionals need to keep track of so much—from cash flow to resource allocation. Plus, keeping operations in line with your set budget is far from easy—especially across multiple departments.

If SaaS budgeting is one of the many items on your list of to-dos, Cledara can help.

Cledara helps you manage and optimize your software spend to stay within budget. Set budgets, check your projected account balance, apply soft and hard limits to software applications, and monitor spend against budget to ensure you’re in line with your long-term financial plans—all on Cledara.

Contents

Contents

The software management solution for finance teams.

Learn more

Subscribe to our newsletter

Receive the latest insights in your inbox

Stephen Boachie-Mensah

Stephen is Cledara’s in-house Finance Manager who thrives in businesses with fast-paced growth. Stephen’s role is to provide insights to the wider business, he has been heavily involved in cross-functional projects stretching across the introduction of global benefits, financial modelling and KPI reporting procedures. Outside of work, football and American football are his favourite pastimes.

Share this post

Subscribe to our newsletter and stay informed on the latest SaaS insights

Explore more

Explore more

What Is Annual Revenue? The Founder’s Guide to Financial Literacy

In this article, we break down annual revenue, what it is, why it matters, and how to calculate it, to help you assess your company's financial health with confidence.
Read more

The 12 Best FP&A Tools for 2025

Interested in learning how to enhance your FP&A strategy with the right software tools? This guide is here to help.
Read more

How to Calculate Opportunity Cost for Your SMB + Real-Life Examples

Understand opportunity cost, how to calculate it, and why it matters. Plus, discover how Cledara can complement your financial decision-making toolkit.
Read more

How to Outsource a CPA for Your Startup: 5 Key Criteria

Outsourcing your accounting to a CPA can save time and resources—here’s how to find the best fit for your startup.
Read more

Win Customers in Competitive Markets with Penetration Pricing

Penetration pricing is a powerful strategy to attract customers and dominate new markets by launching products at competitive, low prices—learn how it works and why it could be your next big move.
Read more

The What, Why, and How of Unit Economics

Is your business truly profitable at the unit level? In this post, we’ll unpack how unit economics provides the insights you need to make smarter financial decisions and drive sustainable growth.
Read more

CFO Dashboard: What it is and Why You Need One

Spreadsheets can only take you so far—discover how a CFO dashboard can transform the way you manage financial metrics, automate tasks, and optimize decision-making.
Read more

Everything You Need to Know About Accrued Expenses

Accrued expenses might sound complex, but they’re simply the costs your business has incurred but hasn’t yet paid—understanding them is key to accurate financial reporting.
Read more

A Guide to Virtual Debit Cards: All You Need to Know

If your business is tired of dealing with the hassle and risks of physical cards, virtual debit cards offer a secure, efficient solution for managing spending online and in-person.
Read more

Revenue Multiples: The Pros, the Cons, and How to Calculate Yours

Discover revenue multiples as a key valuation method for early-stage companies, what they are, their pros and cons, how to calculate them, and the factors that impact their effectiveness in startup valuation and funding.
Read more

How to Identify and Prevent Expense Reimbursement Fraud

We explore the various types of expense reimbursement fraud, their potential cost to organizations, and provide practical strategies for identifying and preventing such fraudulent activities in the workplace.
Read more

How to Become a CFO in Tech: An Analysis of 100+ Careers

A comprehensive analysis that examines the career paths of over 100 CFOs in the technology sector, providing valuable insights into education, experience, and skills required to reach this pivotal leadership role in today's fast-paced tech industry.
Read more

A Thorough Guide to Automated Invoice Processing

Automated invoice processing can revolutionize your business's financial operations by streamlining workflows, reducing errors, and saving valuable time and resources.
Read more

14 Smart Strategies to Reduce Software Costs as a CFO

Software is typically a company’s second biggest expense after payroll, so here are 14 actionable ways to get your spending under control
Read more

Venture Debt: Raising Funds for Your Early Stage Startup

A financing option for startups and small businesses that allows them to access funds without diluting equity, providing a valuable tool for growth, cash flow management, and runway extension.
Read more