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Assumptions are an important aspect of planning and budgeting because information is sometimes incomplete. It is impossible to predict all future events, therefore, assumptions must be made regarding future operational, market, and economic conditions and events. Documentation and communication of significant assumptions is important for consistency and fairness in the planning and budgeting process.

Viewpoint A

Summary: Assumptions are necessary because it is not possible to know or foresee all factors that impact forecasting. Assumptions are made for all functions within the organization, and key assumptions should be documented and communicated.

Viewpoint B

Summary: The Planning and Budgeting process requires more assumptions than any other management process. Documenting the assumptions is critical to ensure the results can be supported and explained, especially over time.

Benchmarks, Resources, Recommendations, Implications

Viewpoint A

Assumptions in the Planning and Budgeting process are essential because, no matter how good your crystal ball may be, the nature of forecasting always leaves something to the unknown.

Defining and documenting the assumptions is a critical step during the initial stages of the planning process. Key assumptions related to the overall strategy of the company should be included in the planning guidelines and communicated to all participants in the planning process. Assumptions should span all operational facets of the business, the marketing outlook, and the financial ground rules to work harmoniously throughout the planning and budgeting process.

Assumptions can relate to both long and short term aspects. Long term assumptions should be tied to the long term goals and strategy. Short term assumptions should focus on the operational initiatives within the immediate 12 month outlook. Information used to form assumptions is usually more relevant in a one year budget than in the 5th year of a 5 year budget. The accuracy of assumptions is also dependent on the length of time taken for the planning process. Companies who usually take three to six months to establish their budgets may find that assumptions originally submitted with planning guidelines may be obsolete. Assumptions should be reevaluated and updated to be in sync with current business conditions and other budget decisions before the budget is approved, which could be associated with the number of budget iterations throughout the planning process.

In summary, assumptions should be in sync with strategic planning, short and long term goals, financial and market conditions, and operational management. (nf)

Viewpoint B

No other management process has as much dependence on assumptions as Planning & Budgeting. Some major categories of assumptions are: Organization, Competition, Regulatory, The Economy, Customer, Supplier, Process, etc. Some assumptions may be trivial and not worth the effort to document them while other may be extremely important. The criteria for documentation should be the reliance by and impact on other assumptions and decisions

Three significant factors drive the necessity to document assumptions.

First, at some time in the future, a decision will be re-evaluated. Meanwhile, time will pass, memories will fade, and conditions will change. A past decision may have been perfectly valid based on the assumptions present when it was made. However, after time has passed, an evaluation of the decision must look to the assumptions that it was based on. If the same decision would have been made, then the decision was valid but the results were not as expected. If the same decision would not have been made, then the decision-making process should be examined and improved.

Second, reviewing past assumptions after the cycle is completed is a path to improving the planning and budgeting process particularly in terms of new assumptions. Significant assumptions should be reviewed to determine how they played out to determine whether the assumption process can be improved, whether the execution can be improved, or whether it was simply out of the organization's control. || || Result Good || Result Bad || || Assumption Good || No change to process || No Change to process - Look to execution || || Assumption Bad || Fix assumption process || Change process and execution || Third, the planning and budgeting process interacts with many processes as well as organizations and organizational levels. Documenting assumptions assists the essential communication process embedded within Planning and Budgeting. (as)


  • Key assumptions should be documented and communicated by a central planning function that maintains configuration control.
  • Key assumptions should be coordinated both horizontally and vertically in the organization.
  • Assumptions need to flow from strategy.
  • Organizational risk should be factored into or documented in assumptions.
  • As the Planning & Budgeting process iterates, assumptions need to be reevaluated and acted upon.
  • A long-term view of financial and resource needs of an organization leads to more accurate short-term forecasts.


  • Your input is welcome here


  • Your input is welcome here


  1. Impossible to guess the forest fire budget impact
  2. Planning and Budget depends on assumptions
  3. Assumptions not documented
  4. All assumptions can be documented
  5. All assumptions should be documented

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