The financial strategy of the company requires planning, budgeting and forecasting usage more suitably. While the three terms are inter-linked and emphasizes building a financial road-map for your business, they are not at all the same. Let’s explore what these terms significantly mean with their similarities and differences between them.
Strategize the plan
The first set up of any business is to strategize the method of planning. The company’s financial position is determined in the short and long term by optimizing liable business for maximizing the available assets. While setting up a business the history of financial knowledge is unknown and the business owners may implement the knowledge gained from comparable businesses. Planning revolves the business
strategy with measurable performance and progress. Implementing the plan on a continual business by incorporating unique information goes for a longer run for stabilizing the business.
On the process of accountability
Maintaining the accounts at the beginning of the financial year yields budgeting cost manageable and generates to the company’s revenue by-siding the expenses. The budget sets up the road map for maintaining accountable income and expenses for that particular year. In a glimpse, budgeting ensures to generate enough money to cover the operational costs. This process is precisely considered on all financial factors. The very next step after planning is budgeting that upholds accountability and promotion of behaviours to keenly execute the business strategy. Budgeting is the process involved in the usage of the past behaviour to predict the future of the company.
The idea of financial forecasting is to predict the financial future of the company based on assumptions. In the meanwhile, the budget is used as a financial planner to forecast and compare the current stats of the company. This makes it possible to predict the company’s position at the year-end. Forecasting predicts to meet the company’s expectations. It allows the managers and controllers to set attainable goals. Forecasting rules out the trends to upgrade the company’s financial position. The process of forecasting can be done only after implementing the strategies of planning and budgeting. Once the business starts to become operational and gains profit, it can project future profits for reinvesting into expansion. Forecasting is more similar to budgeting mere differential to the external factors.
Benefits of Planning, Budgeting and Forecasting
Implementing strong planning, budgeting and forecasting makes your business beneficial as follows:
- The quality of budget figures
- Increases the transparency
- Rapid data collection
- Proper reporting
- Enhances the quality of decision making
- Commits to the business stakeholders
- Reveals clear auditing
- Stabilizes positive insights.