Budgets & Forecasts
Budgets & Forecasts are critical to a business’s well-being and success. To complete budgets and forecasts requires a unique skill set.
Prior to starting the process, it is assumed that the business has accurate and timely financial records. That’s a given. If you are not sure, see my Hierarchy of Financial Needs.
There are a number of ways to approach budgets and forecasts. It is possible to simply add a certain % increase (or decrease) from last year’s actuals. Sounds simple, however, that type of budget is next to useless.
To get the most out of your time the budgeting process requires a lot more thought and insight. Business needs focus, with a clear understanding of the various influences that drives performance. We approach budgeting using the “bottom-up” methodology. That is, where each part of the business is logically thought through.
There are many factors that need to be taken into consideration such as
· the faster the business is changing the higher the business risks
· budgets typically are for a 12-month period
· completing rolling 90-day cash flow forecasts
· greater awareness and appreciation of lead and lag measures
Many components of the business need to be monitored typically through a series of Key Performance Indicators (KPIs). These KPIs (not only financial) need to be well thought through, showing a greater understanding of what factors drive the business and what proactive action is required.
If you are wanting to have a great understanding of your business financials and what factors drive your business call me today.