Overview

To run any organisation, it is necessary to plan. We must say where we want to go and how we think we can best get there. There will be a financial dimension to nearly all the plans prepared by an organisation and most organisations will prepare annual budgets as part of their business planning activities.

Some organisations, however, are moving away from the traditional, detailed budgeting activity, arguing that the timescales involved in preparing budgets mean that they are often out of date before they are approved. To justify all the effort and resource that goes into financial planning, budgets really must add value by communicating, informing and guiding essential business decisions.

In this theme you explore financial planning. You start by investigating the budget that provides the starting point for all the other financial projections: the sales forecast. You go on to look at expense budgets and finally at how financial planning fits within the context of overall business planning.

In this theme you will:

• Assess the process for drawing up a sales forecast and critically appraise a sales forecast from your organisation

• Explore the process for setting and managing expense budgets in your organisation

• Evaluate the benefits and limitations of the financial planning process in your organisation.

Preparing a Sales Forecast

All organisations require some form of income to pay for their expenditure. Sales or income forecasting estimating the level of income you will receive in a given period is a key input to a...