The importance of financial budgets and forecasts
Future proofing is a necessity for your business in a world of uncertainty. Plan for everything and be ready for anything!
So, what are financial budgets and forecasts, and why are they so important in future planning for your business ?
Let’s dive right in…
Financial budgeting vs forecasting
Budgets are tools companies use to establish goals like growth, future trends, or experiences of a company.
When compared with actual results, they allow management to assess where the business is heading and quantify future expected revenues for achievement.
Budgets are set for a specific period, once, twice, or quarterly during the year.
In contrast, financial forecasts estimate the amount of revenue/income more frequently and examines whether the proposed timeframe set in the budget will be met or not.
How does a more challenging economy affect your business?
- Current customers stop buying
- Fewer enquiries or leads
- More challenging to make a sale
- Customers return less often
- Customers spend less on each visit
- Increase in cost of stock
Financial budgets and forecasts work together
Whether collaborating on accurate forecasts, fine-tuning your budget, or planning predictive business modelling, you will face daily business challenges. Budgeting and financial forecasting should work in tandem with each other to address these challenges.
The budget creates the baseline to compare actual results and determines how far those results vary from a business’s expected performance.
Financial forecasting determines how companies should allocate budgets for future periods.
What is involved with setting financial budgets and forecasts?
- Profit and loss – annual and periodic
- Working capital – debtors, stock, and creditors
- Finance – asset purchases and loan repayments
- Cashflow – allow for drawings and tax
Ever wished you could look into a crystal ball and see what the future holds for your business? Financial budgeting and forecasting is as close as you can get!
Your business is your most powerful asset, so why not future proof it today by contacting us for expert advice. We provide services specific to cashflow forecasting and management.
Call the team at either their Howick or Tauranga office for your initial one-hour complimentary consultation today.
Streamline Your Business with a Registered Chartered Accounting Firm
Make the call today and trust your finances to our team of Chartered Accountants & Business Advisors
