Mid-year budget revision: the reforecast explained

Quick answer. A reforecast revises the budget during the financial year by folding in the actuals to reproject the full-year landing. Common practice is a quarterly checkpoint, plus an ad hoc revision whenever a structural variance exceeds your tolerance threshold. No law requires it: it is a management best practice, not a statutory obligation.

A budget is voted once a year, often before the prior year is even closed. Three months later a major order slips, a hire is delayed, a supplier raises prices, and the document no longer describes the real business. Steering on that frozen budget is like driving while looking in the rear-view mirror. The reforecast is the answer: a structured revision that brings the budget back in line with reality, without rewriting it on every whim.

In the SME and startup files we support, the most common blocker is not the absence of a budget but the absence of a revision mechanism. The budget exists, asleep in a file, and nobody knows any longer whether the company is ahead of or behind its target.

These management-control terms are not regulated figures but pilot conventions. Confusing them blurs the decision.

The initial budget is not thrown away. It remains the reference against which you measure variances. The reforecast is a dated version stating where you will land if the current trajectory continues. That is why we recommend keeping both: one measures the starting commitment, the other informs the decision of the moment. For the month-by-month tracking, see our monthly budget-versus-actuals variance analysis.

Reforecast is not a rolling forecast#

The reforecast revises the budget for the current year, whose horizon shrinks as the year passes. A rolling forecast keeps a permanently sliding horizon (twelve months, for example). They are complementary tools; this article covers the mid-year revision and the landing, not the choice between the two approaches.

There is no legal frequency. The useful cadence depends on the volatility of your business. Two logics combine: a calendar rhythm and a variance trigger.

• Calendar rhythm: a quarterly checkpoint is enough for most stable SMEs. A seasonal business or a growth ramp-up justifies a monthly checkpoint.
• Variance trigger: as soon as a structural variance (not a mere timing shift) exceeds your tolerance threshold, revise without waiting for the next date.
• Material event: loss or gain of a key client, delayed hire, lasting cost increase, fundraising, change in scope.

The underestimated risk here is the opposite of inaction: revising too often. A weekly reforecast turns steering into permanent data entry, with no perspective. The right instinct is to separate normal fluctuation from a genuine change of trajectory.

Here is the sequence we apply in our outsourced finance director engagements.

1. Pull the actuals to date. Start from the accounting closed at the last completed month, not the bank balance. Neutralise collected VAT, which is not revenue, and clean up cost and income cut-offs.
2. Compare to the initial budget line by line. Match actuals against the year-to-date budget, separating volume, price and timing variances. A billing shift is not handled like margin erosion.
3. Revise the assumptions for the rest of the year. Rebuild the remaining months from the order book and committed costs, not from the frozen budget. Document each changed assumption.
4. Project the new full-year landing. Add actuals to date and the revised forecast. Break the landing into a P&L and into cash, because cash and taxable result do not follow the same calendar.
5. Reprioritise spending and investment. Classify remaining costs as committed, deferrable or cancellable. Secure non-negotiable outflows first, before any discretionary trade-off.
6. Record and monitor the revision. Freeze a dated reforecast, separate from the initial budget, then track the variance to the reforecast month by month and schedule the next checkpoint.

The simplest landing adds the actuals of closed months and the revised forecast of the remaining months. Take a services SME on a calendar-year basis, with a revision closed at the end of June.

First-half revenue (540,000 euros) is slightly below half the budget (600,000 euros). Rather than mechanically keeping the initial budget, the second half is rebuilt from the real pipeline: the expected landing (1,140,000 euros) comes out 5% below target. The decision then no longer concerns a past variance but the action to take for the remaining six months. To separate these margin levels, see our note on gross margin and net contribution.

This example illustrates a method: none of these amounts is a norm. The logic, however, transfers to any sector.

The reforecast does not float free. The accounting year covers twelve months and is closed annually (article L123-12 of the French Commercial Code). Between two closings, several deadlines pace the year and must appear in the cash landing.

• Corporate income tax instalments fall due during the year (schedule on impots.gouv.fr) and weigh on cash without showing in the month's result.
• VAT deadlines, monthly or quarterly depending on the regime, leave the cash position independently of margin.
• Customer payment terms, capped at 60 days from the invoice date, or 45 days end of month by option (articles L441-10 to L441-16 of the Commercial Code), determine when revenue actually becomes cash.

That is why we recommend pairing the reforecast with a 13-week cash flow forecast and provisioning for corporate tax, VAT and CFE as you go. A positive result landing does not prevent a cash squeeze if tax deadlines and customer collections are not aligned.

A reforecast is only worth doing if it leads to a decision. Too many revisions stop at noting the variance without touching the spending for the rest of the year. The useful sequence is the reverse: the variance drives reprioritisation, not just explanation. We advise always closing a revision with a list of dated trade-offs, failing which the reforecast is just a redone budget, more recent but equally inert.

Second conviction: keep the initial budget intact. The reflex to overwrite it with the new version erases the memory of the starting commitment and makes any year-end performance measurement impossible. The initial budget is a reference, the reforecast a trajectory; the two coexist.

Should you reproject everything or focus on a few lines? Both approaches are legitimate.

In practice, an SME often settles for a targeted quarterly revision and only switches to a full reforecast once or twice a year. A robust forecast build upstream actually reduces the frequency of heavy revisions.

• Cut-off: unrecorded actuals (forgotten accrued invoices) distort the revision base and therefore the whole landing. It is the most frequent error.
• Cash versus result: a result landing says nothing about cash. Corporate tax instalments and VAT can create a squeeze despite a good result.
• Tooling: a manual spreadsheet reforecast quickly becomes unmanageable. Connecting the accounting to the steering (via Pennylane, or a bank aggregator such as Qonto) makes the actuals reliable and speeds up the revision. See also our comparison of Finthesis and Power BI for steering.
• Governance: without a set revision calendar, the reforecast never gets done. Build it into the steering routine alongside the 5 financial management KPIs.

Recently, an SME director approached us after noticing in November that cash was not following, despite a budget that was 'on track'. The revision showed that revenue was on target, but customer payment terms had drifted and no provision had been made for the December corporate tax instalment. The problem was not the result: it was the cash landing, never reprojected.