Budget and Forecasting
Before delving into the merits of each of these business segments and debating on the efficiencies of outsourcing, let’s take a brief look at what budgeting and forecasting mean, and how they are similar and dissimilar.
Budgeting and forecasting are both tools that businesses utilize to decide on their choice of projects based on their financial capabilities, and predict future potential returns of different projects to rank them. Investopedia defines both as, “Budgeting and financial forecasting are tools that companies use to establish a plan regarding where management ideally wants to take the company (budgeting) and whether it is actually heading in the right direction (financial forecasting).” Both these terms are usually used jointly, but there are distinct differences between them.
Budgeting outlines the expected expenses and revenues that a business expects during a specified period, or from a specific project. This includes revenues and expenses projections, expected cash flows, debt reduction plans, and previous data comparisons. In other words, a budget defines the financial position of a company. Financial forecasting, on the other hand, determines the efficient allocation of budgeted resources to different projects. Forecasting, unlike budgets, need to be constantly updated. It also does not need to be as much linked to historical data as it is to current and future business and industry analytics. External events, such as change in a particular law or loss of a customer, also need to be added to the forecasting analysis as and when they take place.
Budgeting and forecasting are used together so often, because their workings need to be in tandem. If a budget is decided for a certain project, based on its projections, then the budgeted finances have to be kept in order along with constant forecasting updates to ensure that the said project is being accomplished on time and according to the pre-decided conditions. Likewise, if the financial forecasting of any project or business is not positive, the budget needs to reflect that and finances and business processes also need to be adjusted.
Most Common Forms of Budgeting and Forecasting Outsourcing
Budgets and forecasts are usually made separately for each department and therefore outsourcing them is also done on departmental basis.
- Sales: Here, the companies take on board outsourcing partners to budget and forecast sales revenues. The past trends of sales and seasonal fluctuations are accounted for in the budget and then forecasting is done for the forthcoming period.
- Capital: This is perhaps one of the trickiest areas because here the real assets of a business are under consideration. The budgeting process determines whether or not a new plant, new factory, new product line, or simply a new investment will be worth the funding, and the forecasting then brings into view not only direct investment but the revenue to be generated from such capital expenditures.
- Production: The most common form of budgeting is done in this category where the market demand for a product or service is forecasted, and then budgets made to cater to that demand as well as plan around expansion or contraction of the production levels for the company.
Benefits of Budgeting and Forecasting
Although both these heads have different key benefits, since they are often targeted and achieved together, they can be clubbed together as well.
- A benchmark is provided for the evaluation of financial objectives of a company
- Efficient communication is established between those who conduct budgets and those who implement them
- Financial resources are better allocated in accordance with the revenue and profits potential of different projects
- Actionable objectives are outlined and strategies formulated for their achievement
- Quick and easy identification of potential opportunities as well as likely pitfalls is made possible
- Unexpected issues in production or operational execution are highlighted beforehand and contingency measures taken to reduce or avoid losses
- A blueprint made and maintained for long term objectives of the business based on short term goals and achievements
Services Included in the BPO Packages
Intersoft BPO provides services available across the market, with the added guarantee of performance based results, assured privacy and secrecy, highly qualified professionals, and state of the art technical capabilities. The service portfolio may include:
- Budget preparations, reporting, monitoring and updating
- Business plans and forecasting
- Financial modeling and forecasting
- Forecasting for Employee benefits, payroll expenses and other related costs
- Cash flow management, analysis, and cash control
- Strategic plans and operational timeline projections
- Startup and expansion budgets and forecasts
- Budget comparisons and forecasting methods as per needs of the business
- Revenue and income budgets and forecasts
- Expenses and investments budgets and forecasts
- Working capital cycle budgeting and work in progress costing forecasting
Outsourcing is beneficial not only in terms of reduced costs here, but also in terms of market knowledge, experience, and compliance requirements for your business to stay ahead of the curve and on top of the company finances. Get your quotes today and put your business on the road to growth and profitability.