Budgets and Forecasts

In: Business and Management

Submitted By tinkerbellski
Words 694
Pages 3
Introduction

Budgets and Forecasts are predictions of future income and expenses and cash flow. They also predict future performance with financial forecasts and projections and with financial models.

Why Budget and Forecast? Budgets and forecasts provide a feasibility analysis. They can help develop a business model, review the company’s key assumptions, and identify resource and capital needs. Budgets and forecasts can be used to find funding. They demonstrate the potential of the business to investors and lenders. Budgets and forecasts can also be used as a management tool. They can help the organization establish milestones and require accountability for accomplishing the milestones. They can help identify risks and show benchmarks. This will help business owners make the necessary adjustments to avoid the risks, to reach the milestones, and to measure up to benchmarks.

Forecasts are important because it can establish measurements to guide management, to facilitate planning, and to facilitate goal setting. As part of the forecasts, the company will review key concepts and issues that will make a difference in the company’s survival. The company also needs to forecast the resources it will need and set up a schedule for using and replenishing it’s resources.

For years, companies have viewed their budgets and forecast simply as a mandatory estimate of the upcoming year’s revenues and expenses. However, this attitude is quickly changing as the marketplace becomes more competitive and organizations become more dynamic. Successful companies are constantly improving their ability to accurately predict their future operations and their related resource requirements. Not only does this heighten the importance of the budgeting and planning process, but it also changes the traditional roles of spreadsheets, legacy budget systems, and software created in-house.…...

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