The instructors’ video on budgeting and forecasting content made me learn that a business may make high sales but without a cash forecast, they would still lack the cash to run the company. In the connect connet, I learned that it is vital for financial managers to have a plan for the future of the business. This is because cash forecast enables a company to grow by distinguishing profits from cash flow and identifying points where there is a need for change for the future success of a business.
The main advantage of cash forecasting in an organization is that it helps to make informed decisions, goals, and strategies that will enable the growth and success of the company. Having a laid-out plan of the cash movement in every field and element in the business makes it possible to plan for the future. Running any organization requires cash in all dimensions (Byrne, 2020, p. 3 ) . Therefore, it is very important for any management to have knowledge of where cash flows into and also where to source cash in the future when there is a need. This is because cash is used to grow any organization and a good plan for the future is important to sustain and even expand any organization.
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The best practices to ensure efficient budgeting and forecasting entails creating a standardized data collection method. These would greatly allow error-free data used for marketing. It is also important for managers to focus on the drivers of a business. These are the most important factors that determine a company’s success. Continuous evaluation of the past budget performance enables to create more accurate decisions through accurate analysis and prediction of the future (Shim & Siegel, 2015, p. 7 ) . Finally, it is also highly essential for the financing management teams to focus on refining the budget system frequently. This is because of any updates that may be relevant due to the market or organization changes that occur before a new budgeting year has begun.
References
Bane. (2020, July 31). Advantages of a cash flow forecast | Benefits of forecasting | Float. Float . https://floatapp.com/blog/7-advantages-of-cash-flow-forecast/
Shim & Siegel. (2015). Cash budgeting and forecasting cash flow: Two pragmatic methods. Budgeting Basics and Beyond , 253-264. https://doi.org/10.1002/9781118106754.ch17
