"I know this example is a long time ago, but it was also the best learning experience I've had when putting together a budget and forecast. In 2009, I was a Plant Controller for a 75m corrugated box plant and the company had forecasted a significant downturn in the economy. They informed me to decrease all sales revenue by 20%, increase costs across the board by 10%, but increase freight by 25%. The increase to freight took my sales revenue from a positive 500,000 net income, to a loss. The plant was in East Tennessee, and the annual budget for freight was 7.5m. The plant could not sustain a freight increase of 25% and continue to operate. The General Manager and I personally visited the 5 closest freight companies and told them that we'd sign a dedicated contract with 2 carriers, guaranteeing them a certain number of loads to haul a week. If they didn't haul them, we'd still pay. The catch was that their prices must remain at current levels and couldn't increase for 12 months. This was a win-win for both parties, since business was already slowing for many trucking companies, and this was a guarantee of more business coming to them for 12 months. The outcome was that our plant only sustained a 7% increase in freight due to lanes that the freight companies didn't haul."

To answer this question, you have to understand what forecasting is. It's not just making a budget for yourself. You can make a budget for yourself at the pay rate you have right now for the next year. Do you take into account if you're going to get a raise? Do you project how much of a raise? Probably not. Forecasting takes into account the busy seasons and basically alters the budget for the year by the time of the year before it ever happens.

If you have no experience forecasting, then explain how you'd handle forecasting by demonstrating your knowledge of it.

"I helped my manager forecast the accounting budget for the next year by reviewing the budget from the previous year, noting the busy seasons, and also noting when the company had influxes of revenue due to high sales for the past five years. By finding the busy times of the year when sales consistently increased, we could increase our budget following that time period. This ensured we could hire two more employees immediately after the busy sales season for to have enough help to assist with year-end close out."