In this summary, we will cover: 

  • What it takes to have a sustainable strategic budget and forecast
  • The importance of merging business strategies with budgets and forecasts
  • What you need to ask yourself when setting a strategic budget and forecast for your business.

Takeaways:

 As much as you may have heard stories about businesses that “made it” without necessarily having one strategic plan or the other, these businesses normally have issues tracking their cash flows, and more often than not, they never realize their full potential until someone does it better than them in the same market.

  • Strategic forecasting not only bridges the gap between budgets and goals but also allows the organization to manage the adverse scenarios. This ensures that changes can be made to strategies, budgets, and forecasts to accommodate any unexpected circumstances.
  • Missed goals may mean missed profit targets and by extension, missed growth targets in revenues, customer base, brand diversification, and so on. Business targets need to be tested for each assumption. Well, for most businesses, a budget and a forecast are simply the end process of their goals – which more often than not, leads to unachieved goals.
  • Strategic budgeting and forecasting ensure that the core elements of planning, forecasting, and budgeting are integrated to be able to take into consideration economic and environmental factors, resource availability, as well as competition; these are some of the core determinants of the outcome of a business growth and profitability.
  • By developing a well thought-out strategy, you will be able to conduct a sensitivity analysis in regards to the set budgets and forecasts in relation to multiple other variables. This, will, in turn ensure that unforeseeable circumstances are planned out for by putting in place contingent measures well in advance.

Summary

Many a time when in charge of organizations, people run into trouble in their daily business operations as a result of employing what I would perhaps term as “misplaced” strategies; and there are always all the signs around your strategies when they are not the right ones for your business.

But this article is not meant to school you on the signs of wrong strategies; you’re right about one thing though, it’s meant to teach you something to do with strategizing in your business.

If you’re like most business owners or heads of key departments in organizations, then you’ve perhaps told yourself at some point that no one understands your business more than yourself. Or maybe, you even wonder why you should trouble yourself over budgeting or forecasting when your profits are already where you always hoped they’d be.

But hear me out…

As much as you may have heard stories about businesses that “made it” without necessarily having one strategic plan or the other, these businesses normally have issues tracking their cash flows, and more often than not, they never realize their full potential until someone does it better than them in the same market.

The point is, with or without profits, it is essential to develop strategies that can be linked to your business budgets or forecasts to help you boost your growth and profitability.

And what’s more? If for some reason cash flows vary from time to time in your business line, budgets and forecasts can really be handy as we’ll soon find out in this post.

So, what’s the importance of strategic budgeting and forecasting to business growth and profitability?

Importance of Strategic Budgeting and Forecasting to Business Growth and profitability

With a well-thought-out budget and forecast, you can be able to plan for any revenue surges in your business. As I mentioned before, businesses operating in sectors such as in the cold drinks and beverages industry usually encounter variations in their sales revenue as the climate changes. A strategic budget and forecast may enable you to put in place countermeasures for such variations.

Planning for when to cut or increase your overheads is also very important for improving businesses’ profits and efficiency. And while at it, you can also be able to spot new opportunities to help you cover the sales deficits in the break periods.

Strategic forecasting not only bridges the gap between budgets and goals but also allows the organization to manage the adverse scenarios. This ensures that changes can be made to strategies, budgets, and forecasts to accommodate any unexpected circumstances.

Incorporating strategies into budgets and forecasts enhances flexibility that caters for several “what if” scenario to enable the planners to evaluate each possible outcome. When incorporated into your business plan, strategic forecasting can help you to come up with more accurate and realistic profit and growth targets.

Missed goals may mean missed profit targets and by extension, missed growth targets in revenues, customer base, brand diversification, and so on. Business targets need to be tested for each assumption. Well, for most businesses, a budget and a forecast are simply the end process of their goals – which more often than not, leads to unachieved goals.

Incorporating the right strategies into your budget and forecast will ensure that the growth and profit projections are built from the bottom up by factoring in many variables including sales and marketing budgets, conversion rates, economic growth rates, market competition, and among other things. This, in turn, makes it easier for goals to be aligned with the fundamental forecast or if need be, more resources to be allocated to fortify the weaker areas.

Strategic budgeting and forecasting ensure that the core elements of planning, forecasting, and budgeting are integrated to be able to take into consideration economic and environmental factors, resource availability, as well as competition; these are some of the core determinants of the outcome of a business growth and profitability.

By developing a well thought-out strategy, you will be able to conduct a sensitivity analysis in regards to the set budgets and forecasts in relation to multiple other variables. This, in turn, will ensure that unforeseeable circumstances are planned out for by putting in place contingent measures well in advance.

To help you set a strategic budget and forecast that will enhance your business growth and profitability; consider asking yourself these, among other questions.

  1. How much sales is the business able to generate in the next one year?
  2. What is the cost of the goods and services you sell?
  3. What is your Cash Flow projection?
  4. What are your business cycles like? Are they independent of economic conditions or do they vary with economic activities in the business surrounding?
  5. In terms of demographics, is your business subjected to change in population affecting the demand for services and/or new and recurring sales revenue?
  6. Does your business have a ready and dedicated team that will help spearhead the set strategies and their alignment and reinforcement?
  7. Are the set budgets and forecasts achievable in terms of the set goals?

These are only but a few questions that can help you keep your strategic budget and forecast in check to enable you to boost the business growth and profitability.

As I come to a close, here’s what you also need to understand…

Forecasts are not just for National Weather Service

Merging your business strategies with your budgets and forecasts is one of the widely used tactics by businesses today to thrive in the harshest of economic times.

A strategic budget and forecast can only be as good as its realism – having a realistic budget will ensure that the set goals are not just practical but also achievable.

Finally, thousands if not millions of businesses are launched each year, and if these are added to the already existing businesses, it becomes even more challenging for enterprises to compete sustainably to ensure a steady growth of their operations. To survive this cut-throat competition in nearly all the sectors, it’s essential for businesses to take time and involve a financial expert when developing a solid strategy that can be incorporated into the overall business budget and forecast.

 

References:

https://www.infoentrepreneurs.org/en/guides/budgeting-and-business-planning/

https://www.forbes.com/sites/forbesagencycouncil/2017/02/03/forecasting-and-budgeting-can-improve-your-companys-fiscal-performance/#1dded4284fc2

https://proforecast.com/blog/strategic-forecasting-important-planning-tool/

http://www.tectonapartnership.com/9-the-importance-of-planning-and-forecasting/