A business to be successful has to not only focus on day to day elements of finances but has to create a financial plan for the future.A financial plan will enable the management team to know where they are going and how they’re going to get there.
Budgeting and forecasting is an essential part of any business. Often these terms are used interchangeably.In this post we guide you through the differences between budgeting and forecasting and how combining them together will give you an insight into your financial future
Budgeting is used to control your spend. This is a periodic exercise which is can be done either on a quarterly or annual basis. Normally, businesses set targets for revenues or expenditure across the entire organisation.Actual versus budgeted numbers provide a clear picture to internal and external stakeholders of the money that is available.
Forecasting is about attempting to predict, as closely as possible, the real financial outcomes you’ll see over a given period. A forecast uses current data to build “What if Scenario’s”.
So for a robust financial forecast it is necessary to have solid financial data.It is apparent that a dynamic forecast is the result of current business knowledge and reliable data. A forecast, unlike a budget, can be run at anytime viz, monthly, quarterly or yearly. A forecast is an essential part of business intelligence aiding decision making.
Scenario planning is a process of trial and error which is played out in theory. Some examples of scenario’s could be:
- what if rentals go up by 5%?
- what if selling prices go up by 5%?
- what if payroll costs go up by 10%?
The answers to all these have a significant impact on the business. Scenario-planning is there to help you understand the impact of your business decisions, and to reduce the potential risk by showing you the most financially astute pathway to take when it comes to planning for the future.
A better view of the future with cloud accounting
Spreadsheets are not up to the task, being time-consuming to update, tricky to share and generally outmoded by the latest in online accounting software. Having a cloud accounting platform as your main accounting system adds real value, by helping the business to record every single transaction – and giving you a pool of real-time data to dip into.
Having this huge pool of financial information at your disposal allows you to create three-way financial reporting and provides a data source you can integrate with your choice from the latest in financial technology reporting and forecasting apps.
With a forecasting solution incorporated into your forecasting you can turn your numbers into a practical reality that you can then execute on. There’s an ever-growing marketplace of cloud-based apps you can integrate into your core system – and that means you can use budgeting tools, budget managers, KPI dashboards and business intelligence solutions to measure business performance and check out those ‘What if…?’ scenarios across the period.
Look to the future and succeed
If you’re serious about making a success of your business, you need to plan ahead, get your budget in place and run regular forecasts to check that you’re on track.
At Integra Books we believe that cloud based services are the future and to achieve this we have partnered with Zoho. We use Zoho Books as accounting software integrated with Zoho Reports. The sync between Zoho Books and Zoho Reports will enable to track your budgets and build forecasts for the future.
Integra Books combines the best domain expertise with best in class technology. Get in touch with us to set ball rolling.