World Business View

Budgeting, Planing & Forecasting  Steps: The three steps involved in Budgeting, Planing & Forecasting include: Planning outlines the company's financial direction and creates a model of expectations for the next three to five years. Planning is often the first step in setting up a company. Budgeting documents how the overall plan will be executed month to month and typically includes estimates of revenue and expenses and expected cash flow and debt reduction. Companies often set up their budgets at the beginning of a calendar or fiscal year and leave room for adjustment as revenues grow or decline. Budgets are compared with actual financial statements to calculate the variances or errors between the two. Forecasting uses accumulated historical data and market conditions to predict financial outcomes for future months or years. Aimed at helping management teams anticipate results based on past information, forecasts can be adjusted as new information is available. I