Planning vs Forecasting: Four Key Differences
Summary
A food and beverage company, for example, might develop a forecast that predicts likely revenues and margins from the sales of coffee and tea during the coming year. Forecasting, in contrast, often serves as outward-facing communication about the state of the organization and its expected financial results given current conditions and assumptions about the future. In the case of a public company predicting quarterly profitability, for example, a forecast is a comprehensive document akin to a financial statement. If the strategic goal is to reach $100 million in sales within three years, then the plan needs to lay out a realistic path for achieving that number. In other words, financial planning should prompt participants to ask questions, challenge assumptions, and make sure management is not setting unachievable goals based on wishful thinking.
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