This one stopped me in my tracks:
Stop using Budget and Forecast interchangeably. Please just stop. pic.twitter.com/YetoiJd9bs
— Former MM PE Backed CFO (@cfo_mm) August 11, 2025
Wait, what's the difference?
A budget is a target or plan for the future, typically created once per planning cycle and fixed for the year. For startups, a budget is more than just a spreadsheet: it is a fundraising tool, a hiring plan, and an outline of how the company plans to spend money to achieve the strategy laid out for investors. It sets expected revenues and expenses, serving as both a roadmap and a performance benchmark.
Early-stage startups often focus on operating budgets (covering headcount, marketing spend, and core expenses), while also tracking cash budgets to ensure they can make payroll and cover burn until the next funding round. Some use zero-based budgeting, starting from scratch each year to justify every expense, which helps avoid bloat. Others take an incremental approach to budgeting, building off last year’s plan if the business is stable.
A forecast is an updated projection of what will actually happen, refreshed monthly, quarterly, or as needed based on the most recent data and trends. For startups, forecasts are essential for updating runway expectations, adapting hiring plans, and reacting to customer adoption, retention, and usage.
Forecasts can vary from short-term forecasts, which might focus on the next 3–6 months of cash flow (including the 13 week cashflow forecast), long-term forecasts, which help model future fundraising needs or expansion plans over the medium term, and rolling forecasts, which continually project forward for a set horizon (e.g., the next 12 months), shifting as new data comes in.
While the budget is a fixed plan reflecting the startup’s goals and commitments (e.g. "we’ll grow ARR to $2 mm and keep burn under $100K per month"), the forecast is a flexible, reality-checked view that drives decisions (e.g. "based on Q2 churn, ARR is trending to $1.6 mm; we may need to delay the Series A raise or cut hiring plans to address cashflow"). The budget keeps the team aligned on the big picture, while the forecast ensures founders and investors have a current, realistic view of the company’s trajectory.