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Forecasting and cash flow - Budget analysis.
The first 200 words of this essay...
FORECASTING AND CASH FLOW
A forecasts helps to prepare for possible situations that you might have to face, whether it is greater profits, or the need for a increased overdraft. By facing situation whilist preparing a budget and considering ways you might deal with the problem you will 90% of the way to handling it when it actually happens. It is also worth considering more than one forecast. By having optimistic, likely and pessimistic forecasts you can prepare yourself for different possible outcomes.
Components of forecasts:
- capital budget
- trading forecasts
- cash flow forecasts
Analyzing budgets gives the chance to deal with potential problems before they occur.
It is essential to set realistic budgets based on previous sales history, but equally important to stay in charge of changing circumstances. Forecasting software lets you see the potential effects on all parts of your business when the unexpected occurs, so you can act in advance to minimize threats and maximize opportunities. People tend to use budgets to look at future profit performance but it is also essential to budget - a balance
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