Forecast is mainly concerned with an assessment of probable future events. Budget is a planned result that an enterprise aims to attain. Forecasting precedes preparation of a budget as it is an important part of the budgeting process. It is said that the budgetary process is more a test of forecasting skill than anything else. A budget is both a mechanism for profit planning and technique of operating cost control. In order to establish a budget it is essential to forecast various important variables like sales, selling prices, availability of materials, prices of materials, wage rates etc. both budgets and forecasts refer to the anticipated actions and events. But still there are wide differences between budgets and forecasts as given below:
Forecasts is mainly concerned with anticipated or probable events while Budget is related to planned events
Forecasts may cover for longer period or years while Budget is planned or prepared for a shorter period
Forecast is only a tentative estimate while Budget is a target fixed for a period
Forecast results in planning while Result of planning is budgeting
The function of forecast ends with the forecast of likely events while The process of budget starts where forecast ends and converts it into a budget
Forecast usually covers a specific business function while Budget is prepared for the business as a whole
Forecasting does not act as a tool of controlling measurement while Purpose of budget is not merely a planning device but also a controlling tool.