Financial Planning

It’s vital to use your financial information in planning for the future, not just recording the past and fulfilling compliance requirements.

Types of financial plans to consider:

Financial Topics

BUDGET

A detailed plan showing the key factors in your plans to determine the income and expenditure expected.

A budget helps you to understand the important factors and assumptions in your plans, to provide insights on your business’s expected performance

A budget is useful to compare your actual results against to help you understand how and why actual performance is different from your plans and what changes can be made in response.

FORECAST

A forecast is a dynamic financial outlook in that it changes more frequently than a budget to reflect changes in a business’ actual financial outcomes.

Forecasts build on actual trends to better understand the likely future financial income, in terms of profit, financial position, and cash levels.

Forecasts can provide earlier awareness of profitability or liquidity problems, allowing more time to react and mitigate financial risks.

MULTI-YEAR PROJECTION

A multi-year projection shows the expected financial performance and position of a business over a series of years.

The projection is underpinned by a financial model that incorporates the key factors driving revenues, costs, and cash movements.

Multi-year projections can incorporate different future scenarios and sensitivity analysis of key factors to help in the understanding of a business’s future prospects.

A financial projection, underpinned by a financial model of the business, allows you to connect your strategy and business decisions to expected financial results.

The combination of these financial plan types to use depend on your business requirements. The larger and more complex your business is, the more benefit you will obtain from the use of all three types of financial plans. The more volatile or uncertain the outlook is, the greater need there is for more dynamic and frequent financial planning.

Recent developments in financial planning applications have improved the functionality available at a relatively low cost. There are a number of these applications now available on the market, and it is important to choose the application that best meets the needs of your business.

I can help you design your financial plans, implement any applications and interpret the information they provide.

If you're a New Zealand business ready to abandon guesswork and make smarter decisions, get in touch below.

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