Financial forecasting and planning - the first step towards your goals
The success of any activity depends on proper planning. This is one of the first steps towards achieving goals. Especially important is a planned and reasonable approach to the use of finance.
The essence of planning
If we are talking about a state or any enterprise, then financial forecasting and planning is natural and understandable. These elements of the management system of economic processes are used in order to adhere to rational proportions between the revenue part and the expenditure side. The principles of effective public finance management are based on preliminary modeling of the movement of resources. The main role is assigned to strategic planning, which is designed for 5 years or more. In this way, significant goals can be achieved.The state develops a program of socio-economic development, draws up a budget every year, providing for all expenditure items and necessary funds. In business - the same picture. Its development depends on proper forecasting and planning. No plan - it means there is no system of actions to achieve the goals. Everything happens randomly. In this case, no matter how large the income, the person does not become richer and more successful. There is no money to improve their offspring - competitors become dangerous.
What is the difference between forecasting and planning?
The task of financial forecasting is to study the future financial position of an enterprise, to develop a strategy for maintaining its sustainability. Forecasts are the basis for developing a plan. Financial planning provides an opportunity to assess the financial situation, available resources, and the possibility of increasing their volume as a result of effective use. According to the time criterion, plans are divided into long-term, medium-term and short-term. The first are designed for a long period and are reduced to the achievement of the final result.They include medium and short term plans.
What is important in the planning process
In order for financial forecasting and planning to be effective, it is necessary:
- the study of the objective features of the development of a society;
- market analysis;
- consideration of the base;
- accounting of previously conducted effective actions;
- analysis of economic factors (exchange rates, loan rates and its maturity, etc.);
- evaluation of alternatives;
- analysis of non-economic factors (competition, legislative changes, etc.);
- contingency considerations;
- constant analysis of the reasons for the ineffectiveness of the planned actions (if any).
The effectiveness of an individual approach
There are many methods of the planning process. They can be used to develop your own system, which will take into account the features of a single company. Individual financial forecasting and planning more effectively, as it provides for different nuances of specific activities.
Planning and long-term business
Financial forecasting and planning is basically not focused on the current state of affairs, but on real business opportunities, in accordance with the goals set. That is, for the long-term and profitable work of the enterprise in the market conditions, the planned use of financial resources is an objective and imperative condition.