Welcome to 2015! To prepare for the next financial year, over the next quarter we’ll be delving into more detail on strategic planning. Specifically financial forecasting and planning. We’ll touch on key concepts to remember (don’t worry we’ll remind you during the year also), together with tips for better forecasting and go intosome useful tools tohelpwith the process.
It’s thecoming up to the start of the financial year, and we know what that means. Strategic Planning! BonusPlanning! Goals and Objectives! From a financial point of view in planning we can mix up the termsForecast, BudgetandTargets. Each has an important role to play in business organisations.
Targets
Having strategic objectives, setting goals, planning to achieve those goals and executing that plan is the key to a healthy business. A target, whether anything from revenueorprofit,helps to improve performancewith bonuses paid on meeting them. At Accountech we have some lofty goals and targets for 2015, some with a fair degree of stretch in them. The timeframe for targets can befor the full year to evenyears in advance.
Forecasts
A forecast however is what you think will happen, updated regularly with actual figures,often going forward 3-6 months. A forecast needs to be what you think will happen, and focuses on decision making. Asthis often ties into forecasting cash flowit’s important to remain conservative, yet brutally honest.
In Practice
Before setting out on the planning journey it’s usefulto think about when you will be usingTargets and Forecasts. In management meetings we find it useful to split discussions between the two. Youneed toreview actual progress against targets, and then have a separate discussion as to what’s happening in the business, updating the forecast for what will happen over the next quarter or so. This helpsto make course corrections as yougo throughout the year.
Should you have any queries or want to discuss the above, please email simon@accountech.co.nz. We’d also love to know what your goals are this year!
