Why do you need a budget for your business?

With a budget, you can:

Track your income and expenses to align with your goals
Identify and avoid overspending or unnecessary costs
Make more informed business decisions

To compare your actuals to your budget in reports, you need to have a budget in Fathom.

If you do not have a budget or your budget is outdated, you can quickly build one in Fathom based on your company’s recent and past financial performance.

If you have already created a budget you want to use in reports, you can import it into Fathom from your source accounting system or Excel:

Import & Use Budgets in Fathom

Build a Budget in Fathom

In Fathom, you can use your past results to quickly build a budget that can easily be updated as the year goes on, without impacting your main forecast. Build a scenario in the forecast tool and then save it as your budget.

While you can use the forecasting tool to budget and forecast your Balance Sheet and Cash Flow Statement, this workflow will take you through the process of building a quick, simple budget for your Profit & Loss or Income Statement.

Follow the workflow below to build and report on your P&L budget in Fathom:

Create a Profit & Loss budget with the scenario tool in the Forecast
Save the forecast scenario as your budget in Fathom
Include budget results in your reports and analysis

Need a budget for a consolidated group? The budget for a consolidated group rolls up from the underlying companies. You’ll need to follow the workflow to build a budget for each underlying company. Then, the budgets will roll up to the group.

Need to create a budget for each division? You can create forecasts and budgets for individual tracking categories, classes, locations, and departments if you import your divisions as standalone entities in Fathom. Follow the workflow to build a budget for each standalone division, then consolidate those standalone divisions to roll up to a company budget.

Create a Profit & Loss Budget

To quickly create a Profit & Loss budget in Fathom:

Open the forecast for a company by clicking the Telescope icon on the My Companies page.
1. If you have not already created a forecast, choose the Quick Start option.
You may want to change the rolling from date by clicking the bolded Month-Year Date in the upper-right corner of the forecast.
1. The rolling from date is your last date of actuals data. You should change the rolling from date to the month before you want your budget to start.
  
  Example: If you want your budget to start in July 2026, and you have actual results imported through June 2026, choose June 2026 as your rolling from date.
Set up your corporate income tax to ensure it’s included in your expenses.
1. Click the Cog/Gear icon in the lower-left corner of the forecast.
2. Select Taxes
3. Create a Tax Expense formula to calculate your corporate income tax. For more details, see our Forecast Tax Expense Accounts article.
4. As you make changes to your projected Profit & Loss values, your tax expenses will automatically re-calculate according to your formula.
Set up loans and depreciation to ensure these are accurately reflected in your expenses.
1. Click the Telescope icon on the left sidebar to return to the Forecast Grid.
2. Click on the first white cell for a depreciation or loan account on the grid.
3. Add a schedule or review and edit an existing schedule to calculate depreciation and/or loan repayment. For more information, see the following article: How to create a schedule in your forecast
Click the Thought Bubble icon on the left sidebar to open the Scenario Manager.
Create a budget scenario.
1. Clearly name the scenario (e.g. Budget FY 27)
2. You likely won’t have any microforecasts, so you can ignore this. If you do have some, you can decide which ones to include in your budget.
3. Do not add a configuration. Configurations are for more advanced scenario modelling and are not necessary for budgeting.
Once you create the scenario, you’ll be working within it. You can tell because the Scenario name will appear in the upper-right corner of the forecast. The taxes and loan/depreciation schedules you set up will be reflected in the scenario.
Click on Revenue at the top of the chart of accounts.
1. In the right-side menu, hover over the baseline value rule. The baseline value rule determines how Fathom calculates your budget.
2. Note which accounts are highlighted in green. Any account highlighted in green will be changed together. This will apply a rule to all the highlighted accounts at once unless you select individual accounts separately.
3. Click the Three dots icon for the Baseline Value Rules option.
4. Click New rule.
5. Choose one of the following (When would you use each option?):
  1. Smart Prediction – Linear Regression. Your budget values will be based on the trend of the previous 3, 6, 12, or 24 months. If you base the trend on the past 12 or 24 months, you can include seasonal adjustments.
    
    For example, ‘This year’s revenue budget is based on the revenue trend of the past 12 months, including seasonality.’
  2. Smart Prediction – Average. Your budget values will be based on the rolling average of the previous 3, 6, 12, or 24 months. If you base the rolling average on the past 12 or 24 months, you can include seasonal adjustments. You can also add an increase or decrease on top.
    
    For example, ‘This year’s revenue budget is the seasonal rolling average of the past 12 months plus a 2% increase.’
  3. Link to previous period. Take the values from last year, quarter, or month and use them for the budget. You can also add an increase or decrease on top.
    
    For example, ‘This year’s revenue budget is based on last year’s revenue, plus a 3% increase.’
    
    📝 Note: Bottom-up budgeting? Use drivers and formulas to calculate your budget figures. Learn how: Use Drivers & Formulas to calculate Revenue, Cost of Sales, and Expenses
6. Leave a Note to remind yourself why you chose the rule (optional). This is useful when you review the budget during future periods.
7. Create rule
8. Your Revenue accounts will be budgeted according to your chosen rule. If there are any revenue accounts that were not included in the rule change or that you want to budget differently, you can click on those specific accounts to choose a new rule.
  
  Hover over the baseline value rule in the right-side menu. The highlighted accounts are the accounts using that rule.
Repeat the process of setting a baseline value rule for Cost of Sales and Expenses. Accounts classified as Interest Income, Interest Expenses, Taxes, Adjustments, and Dividends need to be budgeted with journals and schedules, as covered in step 4.

Accounts not classified correctly? Fathom does its best to match the classifications in your source system, but if something looks incorrect, you can reclassify accounts in the Company Settings.

Once you’ve completed the above, you’ll want to save your scenario as your budget in Fathom.

You can exit out of and return to your budget scenario at any time by clicking the Thought Bubble icon and clicking on the appropriate scenario.

Which rule should you choose to calculate your budget?

The baseline value rule you choose to calculate your budget depends on several factors, including the type of account you’re budgeting, the growth stage of your company, how much seasonality impacts your business, and so on.

Here are some examples of how you could budget your Revenue accounts:

Situation	Baseline value rule	Reasoning
Your business is stable and has been for the last year. Seasonality is not a major factor for your business.	Smart Prediction – Average of the last 12 months	Because your business is stable (not growing or declining), you expect results to remain steady. Last year’s average is a good start for your budget.
Your business is growing. You released a new product line or service about 6 months ago, and it’s had a positive impact on your revenue growth.	Smart Prediction – Linear Regression based on the last 6 months	Linear regression will calculate the growth trend since the launch of the new product or service and continue that trend into the future. You’re essentially saying, ‘I expect our current revenue growth to match the trend of the last 6 months.’
Your business has been stable and predictable for the last year, but it is impacted by seasonality.	Smart Prediction – Average of the last 12 months with seasonality	Because your business is stable (not growing or declining), you expect results to remain in line with last year. However, your business is impacted by seasonality, so you want to ensure the budget takes that into account.
Your business is growing, but not at a steady rate. Looking at the last couple of years of data, you expect about 3% year-over-year revenue growth for next year.	Link to previous period – Last year with a 3% increase	Based on the past few years, you conservatively expect 3% overall revenue growth for next year. This rule is a simple but effective way to build out your revenue budget.

You’re not expected to predict the future exactly. A budget allows you to measure your performance against expectations, and those expectations may shift as the year goes on. You should expect to revisit your budget scenario or forecast throughout the year.

💡 Smart Tip: There are additional value rules available for you to choose from when building your budget. We've highlighted the rules above because they help you build your budget quickly. Learn about all of the value rules available here: Types of Value Rules

Want to budget your Balance Sheet and Cash Flow?

If you only build a Profit & Loss budget, you can still track your business’s performance in key areas. Balance Sheet and Cash Flow budgeting are optional and more advanced.

Fathom calculates projected Cash Flow based on your Profit & Loss and Balance Sheet movements. Therefore, budgeting your Profit & Loss and Balance Sheet will automatically budget your Cash Flow.

To include your Balance Sheet and Cash Flow in your budget, follow our Forecast the Baseline workflow for your budget scenario.

Save your scenario as your budget

When you save a scenario as your budget in Fathom, you are saving a static version of your scenario.

To save your scenario as your budget in Fathom:

Click the Save/Upload icon in the upper-right corner of your forecast.
Select Save forecast as budget.
Select the budget scenario you created to save as your budget in Fathom.

💡 Smart Tip: If you've imported an existing budget from your source accounting system or Excel, you have the option to replace only part of your existing budget with your forecast.

What if you need to update or change your budget or forecast?

As you go through the year and your data updates in Fathom, your forecast will reflect your recent results. Your budget scenario in the forecast tool will also update to reflect recent results. However, your saved budget will retain the original saved values.

Think of the scenario as your working draft, and the saved budget as the final version used in reports.

If your saved budget becomes outdated as the months go on, you can always re-save your scenario (which incorporates more recent actual data into its projections) as your budget.

You can also save different, static versions of your scenario or main forecast to report against with forecast snapshots. Forecast snapshots allow you to retain and report against your original budget or forecast alongside a more updated version.

View 'Budget vs Actuals' in reports

When you save a scenario as your budget in Fathom, the Profit & Loss, Balance Sheet, and Cash Flow values are all saved as your budget.

Our above workflow covers creating a Profit & Loss budget, so you should only report on ‘Budget vs Actuals’ for your Profit & Loss, unless you also created your Balance Sheet and Cash Flow budget within your budget scenario.

To show your actuals, budget values, and how they differ, add a Financials table to a Fathom report.

Learn how: Financial Statements & Tables in Reports - Financials

To show your projected budget values for the next 12 months, add a Financial Trends table to your Fathom report.

Learn how: Financial Statements & Tables in Reports - Financial Trends

Learn more