The budget reforecasting process involves a holistic revision of an existing budget in case a significant deviation is expected in projected income or expenses. Companies opt for budget re-forecasting by observing year-to-date results and projections for the rest of the financial year.
Suppose ABC Corp has noted that its current cash is $1 million and its fixed costs dependent on cash for the next quarter are $200,000. This leaves $800,000 of future spending. If the company’s variable expenses are $900,000 per quarter, how will the shortfall of $100,000 be covered? The predicted shortfall may require the company to do a budget re-forecasting by focusing on aspects like reducing capital expenses, cutting salaries, or opting for a new debt source.