Financial planning and financial forecasting denote different in meaning concepts and represent different technologies in performance.
In broad terms, the plan – it is a system of targets for the development and operation of the facility, including the steps, methods of achieving and resource allocation. And prognosis – is a prediction about the development and outcome of events or about phenomena on the basis of available data.
Management of the enterprise can plan, only those parameters and indicators that depend on it and that he can control: as a rule, most of the costs and smaller portion of the proceeds.
Everything related to development (is at risk) is forecasting that is a tool of scientific prediction and variation analysis. To the development zone and risk zone refer the larger portion of business income, its dependence on the balance of supply and demand, the actions of competitors, the economic development of the region of state and many other factors.
In the classical technology of financial planning as a basis for planning of the future activity of the company people use the planned volume of sales, and then under it they compile other parameters. It means that the method of planning itself originally involves a high risk of execution of all plans and budgets of the enterprise. Unrealized plans lead to losses and gains and acquired assets become a burden for the company. Knowledge and use of methods of predicting and accounting for all significant factors can make plans more accurate and can reduce risks.
Methods of financial forecasting can be divided into expert and statistics. Be sure to use both. Comparing and analyzing the results, you can make fairly accurate prediction. As experts you should involve as internal sources – employees, as external sources – industry surveys, studies of investment companies, marketing companies, consulting companies, customers and suppliers. Statistical methods allow us to analyze the dynamics of past periods and adjust, if necessary, the expert forecasts.
Financial forecasting of company should not be limited with one variant for development. It is necessary to draw up several scenarios, each with its own parameters of income and expenditure, and to choose the most appropriate.
As described above, the cost is mainly controlled by management of the organization. Consequently, moving from financial forecasting to financial planning, you must set targets that characterize the ways of achieving the projected income and resources.
Financial planning is an integral part of business planning of company.
Financial planning involves following steps:
Strategic planning – vision of the company in a few years
Tactical planning – the dynamics of key indicators for the planned movement to the target
Budgeting – the development of budgets, assigning of responsibility, fixing of target dates.
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