Financial Plan Jeana Barnes Professor Sandberg HCS 589 July 6, 2015 Financial Plan According to Grable, J. E., et al. (2008), both the financial plan and the projected budgets help an organization to be successful both in the present and in the future operations. Even though the two aspects go hand-in-hand, they are different in how they influence organizational financial success. The main differences include the fact that the budgets helps one map out the key expenses that will be incurred in weeks or months to come. While financial plan helps on to plan for funding financial objectives and goals in 5 years and over. Creating a financial plan means make a long-term strategy for achieving goals while …show more content…
It also includes the tax liability of the company to the tax authority. Finally, another important financial detail is revenues that are collected from business operations. These revenues are in form of sales returns and also profits that can be worked back to the business and others are paid to the employees and shareholders in common and preferred stocks. The assumptions use in the projected budget In developing a projected budget, there are various assumptions that hold in an order to develop a successful projected budget that will enable the organization to manage it expenses and income in a fiscal year or within any other given period of time. It is assumed that the increase in revenue, salaries and supply expenses per year are 20%, 10% and 5 % respectively. It’s also assumed that travel, maintenance, contracts, marketing, miscellaneous and salaries as a percentage of revenue are 1, 1, 4, 0.5, 2 and 75% respectively. Other assumptions that will be important in making a projected budget include the following: 1. The real gross domestic product (GDP) growth rate for the projected period is 1.6% to 3.6% for 2015 and the trend rate for 2016 to 2018 is 4.5%. 2. The investment return is estimated to be 4.5% in 2015 and will be in the range of 3.7% to 6.2% per year thereafter. 3. The Land premium is estimated to be 2.5% of
By managing the budget the organization will be better prepared for the financial forecasts, which are the company’s future expenses. Some strategies and tools that will assist with managing the budget are zero based, activity based, performance based, cost
For example interest rates, the cost of raw materials including fuel, the number of sales or orders that we make and in turn all of these rely on other factors. The best therefore that can be done when developing a budget is to look at all the factors that are likely to affect the budget and decide how to take account of each one. If there is a previous budget (last year or last month) then it is sensible to look at how this has been achieved or not as the case may be, and what factors affected the outcome. If we are looking at monthly budgets it might be a better comparison to look at the same month twelve months ago as well as the previous months. The more factors we take into consideration when estimating a budget, the more accurate our budget will be.
Planning is a function that is employed by every organization in projecting the future outcome of the firm. Successful firms achieve their goals through the use of different types of budgets. These budgets include, production budget, sales budget, labor budget and expenses budget. These budgets also show the targets that should be achieved by the firm within the budgeted time plan.
* We increased this costs as a percent of revenue 2.7% over the previous year for all forecasted periods
I have project that the first-year revenue of $20,000 and a 15% growth rate for the next two years. The complete cost of sales is projected to average 50% of gross sales, including 40% for the purchase of equipment and 10% for the purchase of additional items. Net income is projected to reach $70,000 in four three as sales increase and operations become more
According to easynomics.com, from Q3 2012-Q2 2015, there was a confirmed upward trend with real GDP rising which translates to approximately 2.26 percent annual growth rate. Although the increase rate is too slow that people may not feel the recovery, but it does suggest the increase.
A budget is an instrument used to help managers ensure that the resources used effectively and proficiently toward the goals of an organization. A budget projection can be made on a yearly base depending on previous year or existing one. They can further be broken down quarterly or monthly depending on it use. Generating a budget is complex undertaking, and for a budget to be effective the organization ought to follow it strictly. However, no matter how closely a business follows their guidelines there will always be some form of variances. The organization should expect a few variances and be able to work these discrepancies in any budget
A budget is a plan which predicts how much a company makes in revenues and how much it is going to pay in expenses and so predicts a profit or loss. A budget is can be prepared whenever a company wants two and for however long a period of time it wants to prepare it for. Companies and people would budget in order to avoid overspending and even if this does happen as it will predict how much money will be needed then the person/ business can arrange for it by getting an overdraft facility or
The forecast for US GDP for the next five years is positive with an average rate of 1.94 percent. From 2016 to 2020, the growth of US GDP as per the forecast will be 2 in 2016, 1.8 in 2017, 1.9 in 2018, 2 in 2019 and 2 percent in 2020 respectively (United States | Economic Forecasts | 2016-2020 Outlook). According to the actual or aggregate forecast for the next five years, US GDP will be $ 18,295 billion in the year 2020. Therefore, the trend is positive, and US GDP will continue to rise gradually.
Budgeting is the systematic method of allocating financial, physical, and human resources to achieve an organization’s strategic goals. Budgets are utilized by for-profit and non-profit organizations to monitor the progress towards the goals, assist in the control of spending, and help predict cash flow for the organization.
The current rate of GDP growth, according to the Bureau of Economic Analysis, is 2.7% (for Q3), and it was 1.3% in Q2 of this year. This rate reflects relatively slow growth, with challenges remaining in the domestic market and with sluggishness in Europe suppressing exports to that region. The rate of GDP growth is predicted to slow to a decline of 0.5% between Q4 2012 and Q4 2013, the US re-entering recession, according to the Congressional Budget Office's projections. These projections are based on the provisions of the Budget Control Act being enacted, though any observers are doubtful that this will occur.
No.of employees * 10% of gross sales = Cost of set up & ongoing communication + No. of employees * (Employee Base Salary + 5% of gross sales)
No project is done perfect the first time; there is always a chance an error that needs correction or new ideas to make it perfect. So it is with creating and monitoring a budget. Having an accommodation for changes in a budget is a very good practice. It helps managers and budget developers respond to competitive setbacks or breakthrough more precisely and quick; by using available resources for good opportunities or correction of errors.
Budgeting is crucial in the well-being of a company especially the financial health status of a company. In fact, no professionally managed firm would fail to budget, since the budget establishes what is authorized, how to plan for purchasing contracts and hiring, and indicates how much financing is needed to support planned activity. It is routine for a company to budget for its expenses. Expense budgets act as a guideline of how much revenue a company would require keeping the activities running. It is used to set the company’s targets for a certain period.
Budget and budgetary control practices are undeniably indispensable as organizations routinely go about their business activities and operations. These organizations are constantly on the alert on how actual levels of performance agree with planned or budgeted performance. A budget expresses a plan in monetary terms. It is prepared and approved prior to a particular budgeted period and explicitly may show the income, expenditure and the capital to be employed by organizations in achieving their goals and objectives.