Planning, Budgeting, and Forecasting Essay
Planning, budgeting, and forecasting are some of the major components of a company. It is a decisive factor for many things. Moreover, profits stream, competitive advantage, and planning are greatly based on this process. So to clear this concept to you, In this sample essay we will be discussing the very same topic.
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In this sample essay, firstly we will be looking at what is planning, budgeting, and forecasting? After which w will discuss the three-step process of planning, budgeting, and forecasting. Later on the importance of planning, budgeting, and forecasting; and benefits of the planning, budgeting, and forecasting will also be discussed.
What are planning, budgeting, and forecasting?
Usually, the planning, budgeting, and forecasting as suggested by the name is a three-step process that helps in determining, optimizing, and laying an organization’s long-term and short-term goals alike. Moreover, this process is usually managed by the chief financial officer of the company. However, this process is not limited to just the finance department. As applications of it are seen in fields like supply chain management, workforce managing and planning, and more.
Moreover, it is safe to say that it is one of the crucial parts of the business. Nevertheless, in the previous paragraph, we mentioned that it is a three-step process. Therefore we shall discuss the three steps in the next section of the sample essay.
Three steps of planning, budgeting, and forecasting
Obviously, the three steps of this process are planning, budgeting, and forecasting. Moreover, we shall discuss these three steps and what do they do below.
Planning is the first of the three steps. Moreover, in planning company’s financial direction are determined. In addition to that, it also states an expectation’s from the company in next 3 to 5 years.
While setting up a company, planning is the foremost thing to do. This is because planning provides a framework for the company’s business and financial objectives.
Budgeting is done at starting of a financial cycle. Moreover, budgeting states that how the planning will be executed in detail even covering month-to-month plans. Plus, it also estimates profits, revenue, and other financial factors.
Furthermore, while budgeting for changes is left. Therefore, it can be adjusted based on profit and revenue flow. Later, the actual statistics are compared to the budgeting to determine the difference.
Forecasting as the name suggests, predicts the financial outcome of each month or year. This is done by analyzing the previous data and market conditions. Moreover, it helps the finance team anticipate the results. Adding to that, budgeting can be updated with respect to new data.
However as seen in budgeting, forecasting is not compared to results to find the difference between the two.
Importance of planning, budgeting, and forecasting
In the previous section of the essay, we discussed the three steps process planning, budgeting, and forecasting. Moreover, one should also know why it is important to use effective planning, budgeting, and forecasting. Therefore we shall look at the importance of this process.
Moving on, the three-step process of planning, budgeting, and forecasting is important as it helps brands in planning better strategies and improves financial analytics. Resulting in a potentially improved revenue stream and higher profits. Moreover, effective planning, budgeting, and forecasting also help in gaining a competitive advantage and secure a better market position.
Furthermore, we read that it helps optimize financial plans. As a result of that, companies can improve their planning and in turn improve performance. Moreover, as the times are advancing and the market is getting more and more advanced. Effective planning, budgeting, and forecasting is more important than ever. Nevertheless, there are various other benefits provided by this three-step process. This will be discussed in the next paragraph
Benefits of planning, budgeting, and forecasting
In this paragraph, we shall be looking at the benefits of effective planning, budgeting, and forecasting. As we read previously in this essay. This process has become more important than ever in today’s market. Therefore we shall look at some of the many benefits provided by the Three steps of planning, budgeting, and forecasting.
Moving on, these benefits are:
- Quickly update plans and forecasts accordingly to new risks and opportunities
- Identify and analyze the effects of changes in real-time
- Improve the connection between operations and financial plans
- Better anticipation of cash flow and improved planning
- Analyze changes and disruptions in the planning and take steps accordingly
- Helps create a growth-oriented budget
- Sales channels are more accurately supervised
- Provide more hard data for making strategies hence improving them
- Better return on investment for the company as a result of better financial decisions
- Based on reliable data a solid company trajectory is predicated on attracting investors.
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Furthermore, if you like this sample essay you can read more essays related to finance on our website. Like The Commonwealth Bank of Australia: Unwitting Mule case study, BF2207 NTU International Finance Assessment, FIN355 Equity Securities SUSS Assessment, and many more.
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