Financial Planning and Forecasting

Financial Planning

Financial Planning is a process, a company displays, typically broken into short term goals, for procuring and utilising the finances and other assets to meet its goals for growth (or) profit based on a reasonable Financial forecast. A financial plan is considered same as a business plan in that it describes what a company plans to do in terms of allocating resources to work to generate maximum possible revenues. Individuals can also take advantage of a financial plan.

An annual financial plan is a guidebook of sorts that tell you where you're at financially right now, what your goals are looking ahead and what areas or issues need to be addressed to meet those goals. The plans covers every aspect of your financial life, from investing to taxes to your Financial life, from investing to taxes to your outlook for retirement. While your starting point in developing your plan may be different based on your age, income, debts and assets, the most important components of an annual financial plan are the same.

Financial Forecasts

Financial forecasting is critical for business success. To managing working capital and cash flows a company must have a reasonable idea of how much revenue it plans to receive over a given time period and what it's necessary expenses will be over that same period of time. Financial Forecasts are commonly reviewed and revised annually as new information regarding assets and costs becomes available.

The new data enables an individual (or) business to make more accurate financial projections. It is easier for established companies that generate steady revenues to make accurate financial Forecasts than it is for new business (or) companies whose revenue is subject to significant seasonal or cyclical fluctuations.

For an individual, Financial forecast is an estimation of his income and expenses over a period of time. Based on that forecast, the individual can then construct a financial planning for obtaining additional income to augmented his personal finances- as well as anticipating expenditures that would deplete them.

Financial Planning and Forecasting

A financial forecasting is an estimation, or projection, of likely future income or revenue and expenses, while a financial plan lays out the necessary steps to generate future income and cover future expenses. 

Alternatively, a finance plan can be looked at as what an individual or company plans to do with income or revenue received. 

While both processes orient Financial activity toward the future, a financial plan is a road map designed, that can be followed over time and a financial Forecast is a projection or estimate of feature outcomes predicted today.