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Budgeting and forecasting

Budgeting and forecasting are common processes for a successful business.
They are often linked together but they’re different. Budgeting and forecasting will make you think about your business model and how if something changes what impact this will have on you. Budgeting and forecasting will help you create a financial model of your business that will help identify problems before they arise. If your business is undergoing a structural change or growing rapidly, you need to know where you’re going. Let us help take you there.

Both budgeting and forecasting are about making sensible predictions for your business based on analysis of past performance, a clear understanding of your present financial situation and educated assumptions about what might be ahead.

Budgeting

The budget includes details about the company’s income, expenses, cash flow and financial position and is often prepared for a year and remains unchanged.
It’s good practice to hope for the best while preparing for the worst, testing scenarios and preparing to adjust your spending plans as required.

And business budgeting isn’t something you do at the start of the year and forget – it’s an ongoing process and a way of checking progress against your goals.

We will work with you to establish a budget for the year based on your objectives and educated estimates, incorporating contingencies for worst- and best-case scenarios.

Then, throughout the year on a monthly or quarterly basis, we provide reports that use the trial balance from your management accounts that show whether you’re on target.

If necessary, we’ll help you adjust your budget after each review, taking into account new information.

Budgeting doesn’t need to be yet another pressure – it should help you feel in control and support you in making confident business decisions.

Forecasting

A forecast is a high-level projection of what will happen, often just key revenue items and overall expenses. Forecasts can be done for different periods.

A long-term forecast might cover several years and be included in your business plan. Short-term forecasts are generally done for operational reasons and can be for a week at a time when a business is experiencing cash flow problems.

We can help you prepare your budgets and forecasts but once you’ve prepared them what can you get from them to help manage your business? We can review them with you and advise on:

  • Are you going to make a profit? And if so, is the projected profit a reasonable return?
  • Do you need outside finance? If so, how much and what sort of finance? Equity or debt?
  • Does the strategy look reasonable?
  • What happens if your turnover falls by 10%? What happens if your turnover increases by 10%?

It is critical you constantly review your actual performance against budget. Variances need to be built into your forecasts so you can identify if you need extra staff or stock.

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