Definition of Planning Planning may be defined as a basic managerial activity, that decides beforehand, what, how and when something is to be done. It refers to designing a future course of action, which focuses on reaching desired ends for the undertaking.
Companies make use of planning, budgeting and forecasting to map out the present and envision the future. Although all three of these functions have their place in running a small business and help owners guide the operations, they each play distinct roles.
Planning Planning is usually the first step in setting up a small business, and continues to be used as things progress.
Planning could be something simple like building your daily agenda, or long-range enough to envision where you want to see your business in five or 10 years. Some planning is done by the seat of the pants, with little more raw data than your vision for the business.
But as more information is available, the planning focus sharpens. Once the business idea takes shape, you might put together a more formal business plan to outline who your customers are, where you plan to make your money and how you intend to attract new customers.
Budgeting Businesses set up how they will spend money with a budget. Budgets determine how existing financial resources are allocated. Budgets are usually set by how previous money was spent and expected income.
The budgets often dictate how much is spent toward payroll, supplies and advertising expenses. Budgets tend to be closer to real-life action. While a plan or forecast can be wrong, an error-ridden budget invites financial disaster.
Most companies set their budgets at the beginning of a calendar or fiscal year, and many leave some room for adjustment as revenues increase or decrease. A forecast is based on past and current business numbers. Forecasts are rarely set in stone, though.
The forecast might be inaccurate, so it would be a mistake to base a budget on that. Far from being an exercise in futility, though, forecasting acts to serve as a basis for further planning. Using All Three Budgeting, planning and forecasting are all useful tools when you run a business.
It takes a plan to get things off the ground. The plan continues to serve through the life of the business. Budgeting works close to the operating side and determines how things will run in the present and immediate future.
Forecasting, while every bit as uncertain as the future, can help clarify things far in advance.• Categorized under Business | Difference Between Planning and Forecasting Both Planning and forecasting are basic and most important managerial activity.
They are closely related to each other. Financial forecasts are regularly updated, perhaps monthly or quarterly, when there's a change in operations, inventory, and business plan.
Forecasts can be both short-term and long-term. The difference between a budget and a forecast August 22, / Steven Bragg. the key difference between a budget and a forecast is that the budget is a plan for where a business wants to go, while a forecast is the indication of where it is actually going.
The principal difference between budget and forecast is that budget is the financial plan prepared by the business for its future economic activities while forecast is .
The difference between a budget and a forecast is both simple and complex.
A budget usually has to do with expenses: it allocates expenditures for a set period of time—a year or a quarter. It’s tactical. The difference between a budget and a forecast is both simple and complex. A budget usually has to do with expenses: it allocates expenditures for a set period of time—a year or a quarter.
It’s tactical. Forecasting is a tool that models financial scenarios based .