Planning, Budgeting and Forecasting: What Every Business Needs to Know

Planning, budgeting and forecasting are rarely static. Shifts in the industry often require you to revisit assumptions, adjust targets and adopt new processes. Below, we provide a comprehensive guide on how to strengthen your approach and stay ahead of change.

What Is Planning, Budgeting and Forecasting?

 
Financial planning involves analysing past, present and future financial data to inform strategic decisions. This data relates to purchasing, production, sales and development, for which planning is done. Forecasting models can include sales, cash flow, budgets and revenue forecasts.

Budgeting involves planning a company's income and expenses for a specific period, typically on a quarterly or annual basis. This includes analysing available cash flows, determining operating costs and financing new initiatives. The allocation of resources and funds from the budget is done accordingly.

In finance, forecasting is the process of making predictions about future financial outcomes. It involves using historical data, market trends and other relevant information to estimate future revenues, expenses, cash flows, and other KPIs for financial success. These projections enable businesses to make informed decisions about resource allocation, strategic planning and risk management. 

Why Does It Matter?

 
Regular and accurate financial planning can help your organisation in several ways. Forecasting helps analyse future costs and revenue trends that may affect the business, both in the short and long term. A company can use forecasts as a tool for planning, preparing for market changes and adapting to uncertain circumstances. 

A realistic, well-constructed budget allows your business to consistently track where it stands financially. This insight represents current operating expenses, as well as the resources available to allocate to growth initiatives. 

Overall, all these sections are important in the financial world because they:

  • Improve Financial Control: Helps track income and expenses, identify inefficiencies, and control costs effectively.

  • Enhance Decision-Making: Provides data-driven insights that support informed business decisions.

  • Increase Agility: Enables organisations to adapt to changes in market conditions or internal dynamics quickly.

  • Encourage Accountability: Departments and teams are held responsible for meeting targets and managing budgets.

  • Boost Investor and Stakeholder Confidence: Demonstrates a proactive approach to managing growth and risk.

For maximum financial efficiency, it is important that planning and budgeting are correlated. Budgeting sets the initial goal, while planning analyses sustainability and progress toward the goal.

Common Challenges in Planning, Budgeting, and Forecasting

 
Planning, budgeting, and forecasting in finance often face challenges related to data accuracy, collaboration and adapting to changing circumstances. These challenges can lead to inaccurate forecasts, missed targets and inefficient resource allocation. In practice, companies often face these risks from different departments. 

The process of overcoming them can be more complex and challenging, but can be efficiently regulated by implementing planning tools for preparing and forecasting budgets. Common challenges companies face are: 

  • Spending too much time collecting the data.

  • Coordinating the data accurately to create accurate plans and budgets.

  • Outdated or unreliable data sources.

  • Traditional budgeting processes can be inflexible and struggle to adapt to rapidly changing market conditions. 

  • Lack of automation due to manual processes, like Excel, which can lead to errors.

  • Limited access to tools that can help in advanced planning and budgeting. 

Although these challenges can be risky and hard to complete, companies can overcome them with a combination of the right tools, implementing automation and robust systems, improving collaboration and creating flexibility. 

Implementing budgeting and forecasting CPM solutions helps organisations streamline financial processes, improve accuracy and align strategy with execution.

Plan, Budget and Forecast with These 8 Tips

Effective and strategic planning management is essential for driving business success and staying ahead of change. These 8 practical tips will help you streamline your processes, improve accuracy and make more informed decisions.

  • Keep Data Transparent

Being transparent and involving your organisation is crucial for alignment and success. Using dashboards to visualise data and performance is an effective way to keep everyone informed, enhance collaboration and centralise communication within a single solution.

  • Use Scenario Planning to Keep Up with Changes

Unexpected events can quickly disrupt your planning, forecasting and budgeting process. Scenario planning allows you to stay prepared by developing backup strategies for potential challenges. By monitoring performance in real time, you can adapt swiftly and keep your plans on track.

  • Automate with AI

AI can streamline your planning, budgeting, and forecasting process by reducing preparation time and enhancing accuracy. By analysing historical data and identifying trends over time, AI delivers objective insights that support smarter and stronger decision-making.

  •  Implement Driver-based Planning

Driver-based planning allows you to concentrate on the key factors that truly impact business performance. By focusing on these core drivers instead of a detailed, line-by-line budget, you save time and gain a more strategic, flexible approach that is applicable across various functions and industries.

  •  Use a Software Solution Like Mercur

By investing in a budgeting software solution, you will be able to plan, budget and forecast in one single solution. It’s easy to set goals, plan for future scenarios and collaborate across different departments or divisions. With real-time monitoring, you gain full visibility and control over your financial performance. Mercur Solutions offers a market-leading platform for planning, reporting, and analysis. Mercur Business Control is a comprehensive solution for corporate performance management and business intelligence.

  •  Set Clear Goals and KPIs

Setting clear goals and KPIs is essential for aligning your efforts with your overall business strategy. Well-defined objectives and measurable indicators help track progress, evaluate performance, and drive accountability across the organisation.

  •  Collaborate Across Departments

Collaborating across departments ensures that your financial strategy and forecasting processes are informed by diverse insights and aligned with the entire organisation’s needs. This cross-functional approach enhances accuracy, promotes transparency, and supports better, more unified decision-making.

  •   Regularly Review and Update Plans

Regularly reviewing and updating plans is essential to maintaining alignment with current business conditions and objectives. It enables proactive adjustments based on performance data, market changes, or new opportunities, ensuring your strategy remains effective and responsive.

Plan, Budget, and Forecast with Mercur Business Control

Mercur Business Control provides a comprehensive and intuitive solution to unify your planning, budgeting and forecasting efforts. By integrating data, automating workflows, and offering real-time analytics, it helps eliminate inefficiencies and reduces manual effort. 

With better visibility and collaboration across departments, your organisation can respond faster to change, align strategic goals and make data-driven decisions with confidence. Empower your finance team and business leaders to stay agile and drive performance with Mercur.

 FAQs

 
How do you do budgeting and forecasting?

Budgeting involves setting financial targets based on expected revenues and expenses, while forecasting uses historical data and market trends to predict future performance.

What comes first, planning or budgeting?

Planning comes first, as it defines the strategic goals and direction of the organisation. Budgeting then translates those plans into specific financial targets and allocations.

 
What is the difference between planning and forecasting?

Planning involves making long-term goals and outlining the steps to achieve them, while forecasting predicts future outcomes based on current and historical data.

 
What is the first thing to consider when planning a budget?

The first thing to consider is your organisation’s strategic goals and priorities. These serve as a structure for allocating resources to meet operational and growth demands.

Contact us for more information on planning, budgeting and forecasting in Mercur:

 

Mercur Solutions (UK) Limited - UK office

Mercur Solutions Limited
Lily Hill Court, Lily Hill Road, Bracknell, RG12 2SJ
United Kingdom
+44 (0) 1344 388 025

Mercur Solutions AB - head office in Sweden

Mercur Solutions AB
Vretenvägen 13
SE-171 54 Solna
 
+46 (0)-459 69 00

 

Malmo Office

Rundelsgatan 16
SE-211 36 Malmö
 

Gothenburg

Västra Hamngatan 21
SE-411 17 Göteborg 

Mercur Solutions

A Swedish company with 50 years of experience, delivering solutions for performance management and business intelligence.

 

 

 

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