Improving Your Company's Fiscal Performance - Forecasting and Budgeting

Talk to our team

04 January 2018

Services:

Expansion & Improvement

All businesses need to plan through forecasting and budgeting to ensure they continue to operate at a profit and provide against all possible eventualities. However, a budget is a plan, a succession of financial goals which are what the business works towards during a fiscal year. It is not tangible but can be utilised to incorporate flexibility.

For those smaller of companies, forecasting and budgeting can mean the difference between a financial profit or loss and possibly contribute to whether they continue to succeed or not during the trading year.

Aim for Quarterly Budgets

Some small businesses may make the mistake of believing a budget is an annual preparation, either at the financial year end or the calendar year end. Realistically, a budget needs to work to incorporate possible changes throughout the year and will need to be revised continually in line with current figures.

By implementing a quarterly budget, projections and targets are more likely to be accomplished because they are achievable and work with current results.

Understand What Your Budget Can Do for Your Company as Well As Its Limitations

It is paramount that businesses do not fall into the trap of believing that their budget is a precise and accurate forecast of its business activity. A budget is merely a financial forecasting tool and a projection and is thereby liable to many changes.

Your budget will take account of your internal business decisions against those outside financial considerations and will, in turn, allow you to continue your enterprise on the right track, being aware of any potential problems beforehand while offering you the flexibility to make necessary choices.

Incorporate Business Decisions into Your Budget

A budget can be a great way of ensuring against future business activities that could affect your cash flow. There may be specific periods of time whereby your business occurs regular slower bouts of trading.

By pre-planning, you can account for this period in your budgeted sales figures to incorporate this action into the allocation of costs against this time.

Similarly, if you know there will be a potentially sizeable monetary outlay required during the year in question, you can plan accordingly in other areas through the budget, ensuring this does not make a substantial economic dent when it does take place.

Get All Departments and Staff Involved in The Forecasting and Budgeting Experience

Getting all departments involved in the budget process is much easier to do in a smaller business. Encourage all staff members to work towards the same forecasted budget by making them aware of its existence.

All too often, staff members have no idea of what the company budget entails regarding the projected forecasts; so they merely work day by day with no concept of the broader financial picture.

If all staff members can access the company’s budget, they could relate and react better towards possible budget cuts and potentially help when reducing overall future budget costs.