Business planning is essential if you are to meet your short, medium and long-term goals, but in order to plan you need to have a thorough understanding of your financial position both now and in the future. Budgets and forecasts are crucial to this.
Firstly, to clarify, budgets are what you plan to spend or receive over a specified period of time, whereas forecasts are what you think you are going to spend or receive over a given time period, based on past experience. So budgeting will highlight where management ideally wants to take the company, while forecasting will show whether it is actually heading in the right direction.
Budgeting and forecasting is usually done at the beginning of the year and will set out a business’ plans for the coming 12 months, however there’s no harm in keeping this flexible – circumstances beyond your control can affect your plans through no fault of your own. In this scenario, rolling forecasts updated on a quarterly basis can provide a more accurate picture of your circumstances.
However you manage your budgeting and forecasting, it can be a time-consuming task that if done incorrectly can prove costly for your business. To get the most out of the process it can be helpful to include employees from across the company, all of whom will have different insights and priorities. It’s also imperative that you are clear about your business goals as well as understanding what’s driving your predictions and any external trends that could impact your figures.
In fact, track everything; no matter how small something may seem it could grow to have a bigger impact on your financial health.
Once you start thinking about budgets and forecasts with this level of granularity it soon becomes clear that specialist advice can be invaluable to make sure your business continues to head in the right direction.
At PRIMOtax our suite of technology and vast range of experience means we are ideally positioned to create accurate, detailed and useful budgets and forecasts.
To find out more about the services we offer, give us a call or book an initial 15-minute consultation.
