---
name: budgeting-forecasting
description: 'Zero-based budgeting, rolling forecasts, variance analysis, scenario planning, and budget management'
metadata:
  author: cosmicstack-labs
  version: 1.0.0
  category: finance-legal
  tags: [budgeting, forecasting, finance, planning, variance]
---

# Budgeting & Forecasting

Create and manage effective budgets and financial forecasts.

## Budgeting Approaches

| Approach | Method | Best For |
|----------|--------|----------|
| Incremental | Last year + X% | Stable organizations |
| Zero-based | Build from scratch each period | Cost optimization |
| Activity-based | Cost per unit of activity | Manufacturing, services |
| Rolling | Continuous 12-month outlook | Fast-changing environments |

### Zero-Based Budgeting Steps
1. Identify all activities and their costs
2. Evaluate each: does it create value?
3. Rank by priority/cost ratio
4. Fund top priorities within budget constraints
5. Cut or optimize low-value activities

## Forecasting

### Rolling Forecast Model
```python
# Structure
- Historical data (12-24 months)
- Current pipeline and commitments
- Leading indicators (traffic, leads, bookings)
- Economic assumptions
- Scenario overlays (best/base/worst)
```

### Variance Analysis
| Variance | Cause | Action |
|----------|-------|--------|
| Revenue ↑ | Volume or price increase | Sustain driver or reinvest |
| Revenue ↓ | Volume or price drop | Investigate root cause |
| Cost ↑ | Variable or fixed increase | Optimize or renegotiate |
| Cost ↓ | Efficiency or lower demand | Validate sustainability |

## Scenario Planning
- **Base case**: Most likely outcome
- **Upside**: +20% revenue, what would we invest in?
- **Downside**: -20% revenue, what would we cut?
- Each scenario has specific triggers and action plans
- Review scenarios monthly against actuals