Financial forecasting, a very important element of business planning, is commonly used as the basis for budgeting activities. The forecast puts forward a scenario the management believe is realistic to be achieved. As per definition, a budget is always wrong and only an educated best guess how the financial results will turn out. However, the process of preparing a budget is very helpful by itself as it helps management to anticipate the company’s problems and require them to find solutions in time. Therefore, financial forecasting will be very helpful for decision-making
A budget is also needed when estimating the future funding requirements and figure out if they can be funded internally or require external sources of financing. Internal financing means using the cash generated from the business’ normal operating activities. On the other hand, external financing refers to the capital provided by parties external to the company such as banks or investors. Therefore, you need to use your budget to analyze how much external financing you will require.
Budgeting and Financial Planning
A comprehensive budget plan is a formal statement of the management’s expectation regarding the sales, expenses, volume, and other financial transactions of an organization for the coming period. Basically, a budget is a set of projected financial statements. These include the forecasts of:
- Income Statement
- Balance Sheet
- Cash Flow Statement
While forecasting an Income Statement, more clarity on future revenues, costs, and profits might be obtained. However, for many businesses, liquidity planning is even more important. Therefore, one needs to forecast a company’s cash flow statement. This also requires to forecast the Balance Sheet.
A budget is not only a tool for planning but also to take control of the financing. At the beginning of the period, building a budget plan is standard. At the end of the period, it will serve as a controlling tool to help the management measure the performance of the actual result against the forecasted budget plan so that in the future performance, it can be further improved.
It is critical to take note that with the aid of today’s technology, budgeting can be used as a very effective tool for evaluation of “what-if” scenarios. This way, the company is better able to come up with the best plan or strategy against different scenarios through multiple simulations. This can be done by financial forecasting which helps provide the necessary data to analyze the business financing.
If the resulting data isn’t to the company’s liking, especially to the budgeted financial statements in terms of various financial ratios such as the liquidity, turnover, leverage, profit margin, and market value ratios, the company the budget serves as a basis to analyze where the problems are or its origin. The company can then act upon and change their previous strategy and business plan. Though quite time-consuming for executives, the need to draft a new budget plan today is standard and viewed as good practice for managing any business in a responsible way.
Budget Spreadsheet Templates
Planning a budget is one thing, but the process of building a budget plan is not as simple as it sounds. You will need the necessary know-how as to ensure that you will be able to draft a solid and sound budget plan for your company/business. Budgeting spreadsheets are one of the common tools used to build such budget plan.
If you simply need to prepare the next years’ budget or if you want to run actual vs. budget variance analysis, a budget spreadsheet template might come quite handy. Not only will you save yourself the trouble of having to create a budgeting spreadsheet from scratch, but you will also obtain a working budget plan template created by expert financial modelers who poured their know-how in the template.
We offer a selection of budgeting spreadsheets as used by our experienced practitioners. The spreadsheets come as Excel files and offer more insights into the budgeting process and the ways to present them.
The following budget spreadsheet templates are used by entrepreneurs, executives, and other users all over the world, such as in the US, UK, Canada, Australia, Japan, and many more countries that are in need of help from experienced financial modelers with substantial know-how.
A simple and practical way to measure your projections by month, including analysis vs previous year, 4 years financial forecast…
This is a financial model template of Budget vs. Actual for 1 year. The spreadsheet is made in Google Sheets…
To analyse where the cash is coming from and going out, cash flow statements are prepared. It has three main…
Track the annual value of your contracts based on YTD billings and current year remaining billings.
See if your income generating assets will be enough to cover your living expenses through retirement.
This monthly budget-to-actual dashboard allows for at-a-glance performance analysis. In addition to analyzing YTD performance, it also provides a revised…
A simple way to measure your projections by month against what you actually did. Includes visual variance analysis. Goes out…
Top 5 Qualities of a Good Budget Spreadsheet Template
Before you decide which budget spreadsheet template you’re going to acquire, here is our list of top 5 qualities that we think is helpful to determine good budgeting spreadsheets.
- Fact-based – Though forecasting is essentially subjective (depending on who the modeler is, the model will vary), it is best to base a forecast on the analysis of facts such as historical figures, market, and industry research which might be closer to reality and fact-based. This will help the user arrive with realistic projections rather than overblown forecast which will not stand the scrutiny of a critical analyst.
- Forward-looking – A plan is a plan since it lists down a set of intended actions used to achieve an objective or goal. Hence, a good budget spreadsheet template must be progressive, intending to help the company/business attain their goal.
- Flexible – The need for budget plans to be flexible is critical to the users since nothing is definite. There will be constant changes as time flies by. So, a good budgeting spreadsheet should be flexible enough as to handle the updates and changes done to it in the future.
- Greater detail for short-term – Budget plans work best for short-term periods. This allows the business to control the funding easier as well as be able to compare the Actual vs Budget plan sooner. Thus, after analyzing the results, the budget plan will be updated again as to ensure that there will be more improvement in the future.
- Focused on risks and opportunities – A good budget spreadsheet template is a model which provides a framework to analyze risks and opportunities that will help the user to come up with the best, educated decision.
“The end result is not an accurate picture of tomorrow, but better decisions about the future” – by P. Schwartz