Plansmith Blog

Planning: Many Aspects, One Purpose

Posted by Sue West on 7/17/23 11:01 AM

I’m often asked, “What are the differences between a plan, a budget, forecasting, reforecasting, what-ifs, and stress testing?” Although some of the actions are similar and often intermingled in conversation, it’s their purpose that defines them. If you’re a client, most even involve similar keystrokes using your Plansmith software navigation; yet each plays a unique role within your organization’s total planning process. Let’s discuss.


To start, everyone’s familiar with a budget, but let’s make sure we see it for what it really is. A budget is a prediction or forecast of a financial position at a set time in the future, typically one year. A budget represents a desired financial outcome and requires consent by your board of directors. Most often a Budget is primarily thought of as cost allocations, but when combined with ideas regarding new business, you will often hear it referred to as a Plan. Once approved, the Budget Plan never changes. It is ‘set in stone’ for the duration of your selected time period.


You’ll notice I used the term forecast above as a synonym for prediction. The terms planning, forecasting, and budgeting are also interchangeable as they are all verbs describing gathering and documenting a future financial position. So then, what is reforecasting?


Reforecasting is one of the most purposeful aspects of having a planning model. Let’s step back a moment to the budget. Remember the purpose of a budget is to commit us to a financial outcome. It does not change, but life does. This is where reforecasting comes into play. Think of reforecasting as re-budgeting. The purpose of reforecasting – this re-budgeting exercise – is to react to current conditions and to adjust the data for the remainder of the year. The objective is to reach or exceed the original goals presented and approved by your board.

Reforecasting allows you to create new product lines, realign pricing to current market conditions, and re-distribute overhead and fee income associated with current business flow.

Many clients do this monthly by simply tweaking account data after their monthly update. Others may have a more formal reforecasting process by meeting semi-annually to address concerns and new business opportunities. Reforecasting keeps everyone on top of current situations and eliminates surprises at year-end. Additionally, reforecasting prepares the data for easier development of next year’s budget as its data has not been left in a stale condition.

For example, let’s say you planned on closing a Commercial Real Estate Loan in March of the current year. But, as March approaches, it looks like that deal will most likely not close until June. What does this mean for your targets? It means you will lose an expected two to three months of interest income, which was originally forecasted when preparing your budget.

When these ‘real life’ situations present themselves, we have two choices: do nothing or be proactive. Reforecasting is the proactive choice. Changing the future data by moving the loan closing to June or July is one part, but then deciding if there are any actions that can compensate for the loss of income is the second part and the true challenge. Do we need to raise loan rates slightly across the board for the remainder of the year, increase fees, or reduce deposit rates? This is a perfect time to meet with your lenders and senior management in a team setting. Testing ideas using your planning model during the meeting provides immediate feedback in the form of measurable outcomes.

Reforecasting is a fundamental advantage of using planning model software and brings us to the next subjects, what-ifs, and stress testing.


The true value of having a planning model is that it allows for easy adoption of environmental changes. It can also simulate a potential change in as many ways as you choose to. Perhaps you want to see what would happen if you matched a competitor’s rates, created a new product, or closed a branch. What-if scenarios can be as simple as a broad change to your rate forecast, or as detailed as a bank merger. What-ifs are encouraged to be performed in a group meeting so ideas can flow, capturing those that work and discarding those that don’t, before testing them in real life. A what-if is performed using your most current plan data and is simply saved to a new name. If the what-if turns out to be a course of action you’d like to pursue, then this plan is one you will continue to use going forward.

Stress Testing

Stress tests are similar to what-ifs in that they are testing something that hasn’t happened yet. The term ‘stress test’ is typically used to test the breaking point of your Liquidity Ratio Policy and that ratio under stress conditions. The ‘stress’ can simulate a variety of situations, such as a loss of deposits, an unexpected call on an investment, or an increase in loan volume. These stress events can be measured separately or together to calculate the potential impact on the company’s liquidity position.

No matter your planning purpose, Plansmith models are equipped with specific reports, graphs, and dashboards that clearly communicate goals. Whether preparing your initial budget, measuring the impact of change, testing new ideas, or regulatory compliance,  we recommend using the following on a regular basis:

  • Balance Sheets and Income Statements
  • Yields & Costs and Offing Rate Reports
  • Simple Variance: MTD as well as FTY (For-The-Year) comparison
  • Multi-Plan Compute Report 
  • Scenario Comparison Report
  • The Executive Dashboard
  • Liquidity with Stress Tests  – using the Compass Add-in for Excel

For a personal discussion on how to enhance your forecasting skills, leave a message for a Planning Advisor at 

Not a Plansmith client? We invite you to contact us at or call 800-323-3281 to discuss your unique situation. 



Thank you,

Sue West


Topics: community bank planning, credit union planning, budgeting, reforecasting, stress testing, what-ifs

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