Any plan for the next year is directly related to money and other resources. The financial plan sets out the amount that can be spent without threatening the well-being of the company.
Developing a budget for the year
The development of an annual plan in financial terms includes:
- Revenue forecast – If the business expects sales to nurse database increase, the expected volume should be recorded.
- Expense plan – salaries, rent, purchasing materials, marketing, etc. When drawing up an expense plan, it is worth considering possible adjustments throughout the year.
- Estimate the net profit – if the figure is low, it is better to the role of content quality vs. quantity in organic search rankings reduce investments in questionable projects.
The expenditure plan is formed on the basis of data from previous years, taking into account the new context. If everything is done correctly, financial planning helps to avoid a critical deficit.
When creating a budget, it is important to take into account unexpected expenses, such as equipment repairs or changes in logistics conditions. For this purpose, it is useful to set aside a reserve fund, which usually amounts to 5-10% of the total budget. In addition, it is worth implementing the principles of Zero-Based Budgeting (ZBB): each budget period starts from zero, without taking into account income, expenses, and other information that was used last year. This approach helps to minimize spending on unprofitable projects.
Taking into account possible changes in the economic situation
A year ago, the market might have seemed stable, but now there are problems with supplies or exchange rates. Therefore, companies often create scenarios:
- Optimistic : If all goes well, the next plan involves anhui mobile phone number list expanding the product line or entering new territories.
- Pessimistic . Projects are frozen, budgets are cut, priorities change.
The result is a flexible plan that moves from one scenario to another without any hard losses.
To prepare for changes in the economy, it is recommended to use sensitivity analysis, which allows you to model the impact of various factors, such as rising costs or reduced purchasing power. For example, companies that depend on imports can calculate budgets based on several exchange rate options. This helps to adapt the company’s development plans depending on the current context.
Budget execution control
For planning to be useful, constant monitoring is necessary. The head of the financial department tracks expenses, analyzes the company’s performance indicators and signals if expense items go beyond the limits. Such discipline helps to promptly adjust plans and maintain the health of finances.