Your partners open the planning meeting with signed fees in one tab and a proposal list in another. Ten minutes in, someone asks what the year looks like if the hospital pursuit lands, and the answer goes straight into the same spreadsheet you use to make payroll and staffing calls.
That is how a hopeful case ends up driving real hires. A forecast shows the revenue, staffing and cash you expect under the conditions you consider most likely. A projection shows results under what-if assumptions, such as winning that pursuit or opening a second office. You’ll come away knowing which document each decision needs and how to build both from your own backlog and pipeline.
Forecasts Carry Committed Work While Projections Test One Decision
A forecast answers “what do we expect?” A projection answers “what happens if we do this?” The forecast starts from work you already hold: signed contracts, phase schedules, a weighted pipeline of proposals with a realistic chance of winning, and the team on payroll today. The projection starts from a decision you haven’t made yet.
The AICPA Splits Prospective Statements Into Forecasts and Projections
The American Institute of Certified Public Accountants (AICPA) treats forecasts and projections as two forms of prospective financial information under attestation standard AT-C section 305. That section replaced the former AT section 301 under Statement on Standards for Attestation Engagements (SSAE) No. 18, as the AICPA’s AT-C cross-reference table shows. It applies to practitioner reports dated on or after May 1, 2017.
A forecast rests on the conditions the firm expects and the actions it plans to take. A projection presents the same statements under one or more hypothetical assumptions and answers a what-if question about a decision the firm hasn’t made. A forecast also needs a realistic, supportable premise, which for an A&E firm comes from signed fees, phase schedules, past hit rates and actual utilization.
Seven Dimensions Separate a Forecast From a Projection
The table compares the two documents across the planning calls an A&E firm makes most often.
| Dimension | Forecast | Projection |
|---|---|---|
| Assumptions | Conditions you expect and the course of action you plan | Expected conditions plus one or more hypothetical assumptions |
| Time horizon | Next 12 months, extended a month at a time in a rolling model | The life of the decision; Small Business Administration (SBA) lenders ask for two years of projections when history falls short |
| Audience | General use forecasts can reach third parties you never meet | Limited use by your firm and parties negotiating directly with you |
| Update cadence | Monthly, from current backlog and pipeline | Built per decision, then retired or folded into the forecast |
| Revenue use | Remaining backlog by phase plus weighted pipeline | One pursuit, service line or market at full value |
| Staffing use | Planned hours against current capacity | A new hire or team starting in a specific month |
| Cash use | Invoice and collection timing on current work | Lease deposits, loan draws or office build-out costs |
Read across any row and the split holds. The forecast carries what you have committed to, and the projection carries the one thing you are testing.
Partner Commitment Decides Which Document You Need
Each document fits a different kind of planning call. Use a forecast for:
- Annual budgeting
- Rolling cash planning
- Monthly staffing reviews
Use a projection for:
- A senior hire ahead of a pursuit decision
- A second office or a new service line
- A line of credit or term loan application
- A large pursuit that would reshape backlog if you win
The deciding question is whether partners have committed. A forecast carries decisions already made, so it drives payroll, staffing and cash calls. A projection carries one decision still on the table. Keep it out of the numbers you run the firm on until that decision is approved. PSMJ Resources lists reactive hiring and office growth without rationale among the mistakes it helps firms avoid.
Each Report Holds Three Statements Plus Key Assumptions
A complete prospective report mirrors your historical statements and adds the reasoning behind them:
- Income statement: Revenue, cost of revenue and net income for each period.
- Balance sheet: Receivables, cash, debt and equity at period ends.
- Cash flow statement: When fees convert to cash and when payroll, rent and consultant bills go out.
- Summary of significant assumptions: Win rates, phase timing, utilization, billing rates and collection lag. Under AR-C section 80, a certified public accountant (CPA) won’t issue a compilation report without it.
The report also summarizes your accounting policies, states what it intends to present and warns that results may not be achieved. A projection adds two things: it flags which assumptions are hypothetical, and it describes the limits on its usefulness.
Put a Phase Date on Every Forecast Dollar
Every dollar in the forecast needs a phase date attached, because timing drives both staffing and cash:
- Backlog burn: Spread the remaining fee on each signed contract by month across its phase schedule. Pull out stalled work. Kleinfelder’s president told Zweig Group that a full backlog can carry projects on hold, contracted but not allowed to start.
- Weighted pipeline: Multiply each proposal’s budget by its win probability and spread the result across the expected phase timeline. Set probabilities from your own hit rates by client type, market sector and contract size, as Structure magazine recommends. Keep this layer on its own line, since PSMJ cautions against confusing probability-weighted soft backlog with hard booked backlog.
- Staffing drivers: Convert both layers into hours by role and month and compare them with capacity. The American Institute of Architects (AIA) small-firm budget guide ties the pieces together as Net Revenue = Total Labor x Utilization Rate x Net Multiplier.
- Cash timing: Shift revenue to invoice and collection dates, and add the average lag between contract signing and the start of billable work.
A $300,000 design fee at 40% probability, with work running from month four to month eleven, adds $120,000 of weighted revenue across those months in proportion to each phase budget. That figure is $300,000 x 0.40. On a single pursuit the weighting is wrong by definition, since you’ll win $300,000 or nothing. Use the weighting across a full pipeline. Monograph’s Pipeline Management runs this budget-times-probability calculation across phase timelines.
Model One Decision Across Base, Best and Worst Cases
You build a projection by starting with one decision and modeling several versions of it. For a project architect starting in March, the hire is the hypothetical assumption and everything else stays at forecast values:
- Base case: The hire bills at your current utilization once onboarded.
- Best case: The pursuit the hire supports lands on schedule.
- Worst case: The pursuit slips two quarters and the salary runs against existing backlog.
Then move the single driver that worries you most, such as start date or win rate, on its own. Harvard Business Review advises building extreme but plausible scenarios, and scenarios that wouldn’t change your decision aren’t extreme enough. FMI limits a useful scenario set to no more than five, and AT-C section 305 lets a projection show a range if the range isn’t selected in a biased or misleading way.
Once partners approve the hire or sign the lease, you expect to take that course of action. Include it in the forecast and retire the projection. The projection has done its job, and keeping it alive beside the forecast only invites the two to drift apart.
A Rolling 12-Month Forecast Moves With Your Sold Work
You add a new month to a rolling forecast each time a month closes, so the view always runs 12 months out. The Chartered Institute of Management Accountants (CIMA) defines it as a forecast you update by adding a further forecast period each time you report actual results and revising the months in between. Monthly is the most common cadence, with 46% of organizations in the FP&A Trends Survey 2025 forecasting monthly and 40% quarterly.
A fixed annual plan ages faster than A&E backlog moves. Sold work shifts every month as projects win, slip or pause. A budget written in January against the backlog you held then overstates the back half of the year well before billings show the shortfall. Engineering backlogs run longer: the American Council of Engineering Companies (ACEC) reported a 12-month median backlog in its third-quarter 2026 survey. Each monthly update also shows months of sold work: Zweig Group divides backlog by monthly net service revenue and advises firms to recruit before workload arrives, not after teams are overwhelmed.
Lenders Ask for Projections Built on Stated Assumptions
A 7(a) lender whose borrower’s recent cash flow doesn’t cover debt service after the loan must obtain two years of detailed projections with supporting assumptions under SBA standard operating procedure (SOP) 50 10 8.1. The SOP asks for the numbers and the assumptions behind them, and it doesn’t require a CPA report. A lender who wants outside involvement can ask for one of three CPA engagements. A compilation assembles the statements and carries no assurance. An examination ends in an opinion on the presentation and assumptions. In agreed-upon procedures, the CPA reports findings only.
See Signed, Weighted and Available Hours in Monograph
Separate files for pipeline, proposal weights and planned hours keep the forecast behind your backlog. You learn you needed a hire after the team is already behind, and the pursuit you staffed for has started without the people to run it. Run one check: for any month in the next year, can you see signed hours, probability-weighted pipeline hours and available hours by role in one place? Any month that takes a copy-paste means you update the forecast after your backlog has changed.
Monograph is firm management software built for A&E firms by founders with architecture degrees, and 16,000+ architects and engineers across 2,000+ firms use it. Workbench reports an 8x faster staffing process with Monograph. Two of its forecasting features turn the pipeline into revenue and staffing views:
- Revenue forecasting: Its opportunity forecasting multiplies each proposal’s budget by its win probability and spreads the result across phase timelines.
- Capacity forecasting: It draws on compensation hours per employee and weights expected lead hours by win probability, so you see where demand outruns your team before it arrives.
Monograph connects pipeline, phase budgets, staffing, timesheets and billing, so the signed, weighted and available hours check runs for any month in the next year without a copy-paste. Request a demo to see that view on your own backlog and pipeline.
Frequently Asked Questions
Is there a difference between a prediction and a forecast?
Yes, in emphasis. Merriam-Webster notes that a forecast usually deals in probabilities rather than certainties. Paul Saffo goes further in Harvard Business Review, arguing that true prediction works only in a world where events are preordained. Your firm’s forecast assumes the opposite, since hiring and pursuit choices change the result.
What is the difference between a projected and an actual budget?
The projected budget is the plan. The actual is what the books record after the period closes. Comparing them is variance analysis, which AccountingTools describes as investigating actual versus planned results and explaining why the gap occurred. You have a favorable variance when revenue beats plan or costs come in lower. The reverse is unfavorable.
Which one will a lender or investor expect to see?
Outside investors reading an offering need a forecast. Your bank can see either, because a lender negotiating your line of credit deals with you directly, so a projection is allowed there. SBA lenders want projections with stated assumptions when your history alone doesn’t show enough cash to cover debt service.
What role do hypothetical assumptions play in a projection?
They define it. A projection holds expected conditions in place and changes only the conditions you’re testing, such as a hire, a lease or a won pursuit. The report must name which assumptions are hypothetical and, if any are improbable, say so.
