Budgeting and forecasting are tools that assist us in meeting our financial goals. Companies can use budgeting to establish a plan regarding what the company expects to achieve for a specific period. Financial forecasting assists a company in establishing future outcomes based on historical data and trends as well as estimated sales. Although the creation and implementation of a comprehensive budget and forecast for your business or personal finances can seem overwhelming, it is the most effective way to set financial expectations and achieve success in your financial affairs.
The budgeting and forecasting process is especially helpful in providing you or your business financial stability. The process of understanding where you are and whether you are heading in the right direction is pivotal in achieving financial success. There is no better feeling than realizing the achievement of long-term financial goals such as; purchasing a home, moving your start up from Angel investors to an IPO, or exceeding your nonprofit’s fundraising goal.
Those who can benefit from budgeting and forecasting:
Developing a personal budget helps align your aspirations and financial values with reality, and is essential if you’re hoping to gain control over spending and begin working towards your financial goals. A budget can take you to a lifestyle you desire, but it also can keep you within a lifestyle you currently enjoy. Understanding where you are spending your money helps drive your spending in a direction that aligns with your personal financial values. The ease of one-click online purchasing and small purchases in the moment seem inconsequential but can quickly add up. Tracking the totality of your spending helps you understand where all of those swipes are going and what your spending looks like as a whole. This big picture view allows you to see your entire financial picture and is crucial to ensuring you are spending in alignment with your goals.
For many small-business owners and start-ups, managing funding and seed money is crucial to staying afloat. Oftentimes, there are a variety of financial fires to put out at any point that is difficult to find time to do financial planning, thus tracking spending and cash flow falls to the wayside. Budgeting is a powerful tool that enables business owners and start-ups to control their cash flow rather than having it control them. Robust budgeting and frequent analysis of projected vs. actual cash flow will give your start-up the fuel it needs to keep reaching your business goals and growing your start-up to its fullest potential.
If you wonder how well established companies continue to thrive and have financial success, it is most likely due to the adherence to a sound budget and forecast. Proper forecasting will help to minimize the role of luck or chance in determining business success or failure. Financial estimates can be calculated based on estimated sales and the related cost thereof. How much capital is needed for expansion, new product design or development, or additional infrastructure all depends upon accurate forecasting for success.
Nonprofits can greatly benefit from budgeting. One way that a nonprofit board and management plan for future revenue and expenses is by creating a budget. Approval of an annual budget is one of the fundamental elements of sound financial management. Budgets are often referred to several times throughout the year and may even be requested by parties involved in financial transactions with the nonprofit organization, such as banks, or by donors/grantmakers considering a gift to the organization. A strong and constantly updated budget allows nonprofits to ensure they are spending as expected and to achieve the greatest potential positive impact.
Success is when preparation meets opportunity. Being prepared with a focused budget and forecast that meets your needs, invites success and opportunity to come knocking on your door. For assistance with the development of your budgetary needs, please contact your L&B professional at (858) 558-9200.