When budgeting and forecasting sound the same, why are the often so dissimilar?
Budgeting is a planning activity, it takes place before the start of the upcoming fiscal year(s) and sets out the expected sales and expenditures for your business over the next 12 months (or more, depending on your business structure). This includes revenue, expenses, profitability and cash flow, and sets the context for your finances. Over the fiscal year you will refer back to this document to gauge whether you're on, over or under budget.
In contrast to budgeting, forecasting is an activity which takes place during your fiscal year. It may be done quarterly or monthly (or somewhere in-between if that would suit you better!) and takes into account opportunities and challenges which may have previously been unforeseen. This gives you the freedom to review your financial data in real time, and is a crucial process to assess the performance and react to changing circumstances. If sales are coming in faster than expected, or there is a large unforeseen expenditure halfway through the year, forecasting will enable you to keep on top of these fluctuations.