Business planning is most effective when it’s an ongoing process. It is better to be able to act quickly when and where necessary, rather than having to react to events after the fact, once they’ve already happened.
Budgeting and forecasting are essential tools in the business planning toolbox. Many entrepreneurs, NPO’s and small businesses far underestimate the value of budgeting and forecasting in business planning, not realizing that it is more than likely one of the main reasons why businesses fail. 95% Of businesses fail within the first 5 years.
Forecasting
Forecasting is valuable to businesses because it gives them the ability to make informed business decisions and develop data-driven strategies. Financial and operational decisions are made based on current market conditions and predictions on how the future looks.
The goal of business forecasting is to develop better strategies based on these informed predictions; helping to eliminate potential failure or losses before they happen. Forecasts serve as input for preparing budgets that help management develop the company’s long-term strategic plan.
Budgeting
Budgeting is particularly important for small-business owners who often operate with little tolerance for error; being even slightly off on cost projections or earnings can have a devastating effect on the enterprise.
Carefully constructed budgets enable a business to continually track where they are financial. This provides the basis for strategic, long-term planning for everything from current operating costs to potential expansion. Knowing where the budget stands opens up the ability to invest in new machinery, product development or equipment, hire employees and help set earning goals in line with the organizations’ corporate financial objectives.
Budgeting is important because it helps control spending, track expenses, save money, make better financial decisions, prepare for emergencies, get out of debt, plus make sure that the business has money for future projects and stay focused on your long-term financial goals. Budgeting is the basis for all business success. In short, it helps with planning and control of the finances and operations of the business.