Budgeting is a part of a planning process that you undertake in advance of your next business year. It is where you plan for the results of the company’s activities for the next year. Budgeting is important because it provides a target for management to strive for in its operations.
Forecasting is performed at different times over the year to provide a best estimate to as to where the company results will end up at the end of the year. Forecasting has more relevance as the year progresses since this process can take into account changes in the business environment that management might not been able to identify at the beginning of the year (e.g. economic downturn or change in interest rates).