Budgeting And Forecasting For Business

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Budgeting and Forecasting for Business
By Steve AH Lloyd | Submitted On August 13, 2013

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Expert Author Steve AH Lloyd
Business purpose

The purpose of any budgeting or forecasting activity is to obtain a forward looking view of the business in order to facilitate resource allocation and decision making. The financial forecasts you prepare are a means to that end, not an end in themselves. You need to have this …show more content…

You, or one of your team, should be available to support them in this exercise.

This should give you the basic information to prepare your operating profit and loss.

You then need assumptions on

· Borrowings & Interest

· Tax

· Capex & disposals

· Working capital movements

· Share issues

· Dividends

To allow you to work up a balance sheet and cash forecast.

Ensure you leave time in the plan for your team to pull the various components together and for at least one re-working of the budget if the original version is unsatisfactory.

Tools and systems

Everyone has access to Microsoft Excel and it is possible to build very effective budget systems with this software. You need to be particularly aware of the risks of spreadsheets and the ease with which errors can creep in.

Don 't exclude the use of specialist budgeting software. Well implemented, it can dramatically reduce timescales and improve accuracy. Look for a product that allows you to control different versions of the budget and that integrates well both with Excel and your main business software.

In the first year of use, you need to allow plenty of time for implementation.

You will probably end up with myriad versions of the budget applying different assumptions. Keep a log of the versions with the changes that were made so that you know exactly what each version

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