Budgeting And Forecasting - Don't Be Taken By Surprise

You will have to deal with many unexpected events during your business life, but by ensuring you do everything you can to anticipate scenarios and outcomes you'll be better equipped for a fast and effective response as and when they arise.

The importance of budgets and forecasts

Budgets and forecasts are an essential part of the business and scenario planning process, as well as being a key risk management tool in your business. They are used both internally and externally – your bank will almost certainly take a keen interest in your calculations.

Budgets are typically fixed in advance and remain static for the duration of a selected period. They provide management with the ability to identify how and, more importantly, why actual results differ from those that were originally expected. It may be that sales have been over or underachieved, that margins have varied or that an unwelcome bad debt has arisen. There may have been unexpected currency fluctuations, or