For some small business owners the necessity for budgeting and forecasting is limited to a top level cash flow summary of how much money is available within the present or next month to spend on the businesses requirements.
The exercise of budgeting and forecasting can sometimes be seen as tedious and time consuming as well as non-productive. This is generally due to the information not being utilised in the right way. If that is the case, the time spent pulling the information together has provided no value to the business.
Budgeting and forecasting are planning techniques with a main purpose of supporting the business owner in their decision making process. The major benefit is that these methods provide not only current financial information but relevant financial information for months and sometimes years ahead. This enables decisions about planning for new products, stock holding requirements, operating upgrades, recruitment, marketing and sales activities to be made much further in advance.
Budgeting uses financial information on an estimation basis to quantify the expenditure expectations for a future period, whilst forecasting provides an estimate of the amount of revenue that will be or can be achieved. So effective forecasting indicates where the business is headed and budgeting provides a plan for expenditure.
Budgeting is usually re-evaluated periodically throughout the year and deals with the expenses that may be expected over a future period and enables the comparison of actual results against expectations.
Forecasting serves to provide the company with an estimation of it’s financial performance in the future based on examining historical. If you wanted to do this internally without the support of a financial expert, there available methods to conduct the exercise. The easiest way to forecast is first to collate information about your company’s recent performance. Use income and expense information from the last year to project performance based on trends and knowledge of your market. There are also templates available that you can download from the internet should you wish to do so.
However, it is important to be mindful that in order to reap the benefit of budgeting and forecasting, the ability to read the information and project useful information that is realistic and beneficial is paramount. On this point alone consulting a financial expert to support you in order to get the best value from the exercise can bring the best results. They can also assist you with updated information and so you can use it on an ongoing basis as opposed it being one off project
Good accountants will be able to not only build your budgets and forecasts for you , but they can analyse and interpret the information in a way that is relevant to you and your business. They can also periodically update your financial budgets and forecasts and work with you to give you visibility of your finances in the future. This enables you to make decisions and plan accordingly.
Here at Keen Dicey Grover, due our close working relationship with our clients, we make it our business to know their businesses. We can therefore ensure that budgets and forecasts are created in a way that is suitable to their business and industry. This helps us to conduct relevant reviews of the business and its performance which measure the effect of planning decisions against realistic data.
With over 40 years of experience analysing financial data, we work hard to provide visibility, eliminate the unknown and ensure our clients feel confident and informed about the status and future of their businesses.
Keen Dicey Grover
We care…………..we really care