Budgeting, planning and forecasting (BP&F) are three integrated steps for the smooth running of a company’s fiscal year.
No matter how big or small your business may be, an accurate budgeting and financing process can help a company achieve its financial goals. But how can auditing firm in
Malaysia improve forecasting and budgeting?
Here are 7 expert tips to help you budget and forecast for achieving annual financial goals.
1. Ensure Transparent and Clear Goals are Set
Often auditing firms fail to plan and budget the fiscal year accurately. This leads to expectations of unrealizable goals and inaccurate predictions of the future of a business. With clearly-set goals, it becomes easier to follow the plan and understand where the company’s finances are heading.
2. Prepare the Budget According to a Plan
Planning is the first step if you want to have an overall view of the fiscal year. While budgeting, stick to the plan, based on actual cash flow, revenue and expenses rather than what’s expected to be earned in future.
To simplify it, here’s an example: Your business has the budget to reach the level of your competitors with some investment in new equipment and machinery. However, this decision could put you in significant debt if you run out of cash which could sustain your business. Later on, you will need to plan to get out of the debt trap. This is planning to the budget.
On the contrary, budgeting to the plan would require the auditing officer to consider the long and short term consequences of new investments and plan accordingly.
3. Communicate and Make Informed Decisions
Budgeting and forecasting is basically a team effort. Communicate with each department to provide realistic goals for each month and year. Leaders and teams can be involved in determining realistic budgets for each department. They may offer a different perspective to you for future plans that you can consider.
4. Set Adequate Time for B, P & F
Budgeting shouldn’t be a robotic act of filling in facts and figures for the cloud-computing software to predict. Rather, competitive accounting services in Malaysia consider the previous year revenue, cash flow, budget, payroll and HR services budgets, etc. against the organization’s current situation. This is because budgeting and forecasting lay a framework for future budgets, limiting any major changes to the company’s revenue stream later on.
A strong budget helps to create convincing sustainability reporting for financial investors of the company. Thus, a keen eye is needed to find ways you can achieve positive cash flow and profit for the upcoming year.
5. Prepare a Flexible Budget
For better forecasting and budgeting, it is essential to avoid a static and unchanging budget. Because annual budgets and forecasts can become obsolete and inaccurate within the first 3 to 4 months of the year. Therefore, it should be flexible to allow for unforeseen changes. For example, tax incentives in Malaysia after COVID-19 pandemic require companies to alter their budgets.
Sometimes, inflexible budgets can frustrate employees if they are held accountable for unrealistic goals. In the worst case, this can lead to faulty decisions and plans impacting a company’s financial health.
6. Implement a Rolling Forecast
No matter what, no one can predict the circumstances that may arise during the year. To keep up with equipment failure, industrial trends and internal conflicts, it is necessary to implement a rolling forecast for the business.
After each quarter of the year, keep updating financial forecasts for the upcoming months based on the current situation that can help you predict future profits better.
Rolling budgeting and forecasting also let you align the budget with the annual strategic plan while maintaining the accuracy of budgets and forecasts.
7. Simplify the Process
By simplifying the process of budgeting and forecasting, you make the entire job easier and more accurate. But how it can you achieve this? With automated data aggregation and data entry process. Using technology for efficient budgeting and forecasting is an error-free process, far easier than the manual entry of digital data. Once a strong budget is created, all you would need to do is to update it on a quarterly basis to cope with the sudden changes that hit a company from time to time.
However, invest proper time to ensure that all the data entered is important because, without it, the entire automated framework of budgeting and forecasting will turn out wrong. For more information, feel free to get in touch with us.
