Forecasting and Budgeting

Forecasting and Budgeting in UAE

Budgeting and financial forecasting are tools that companies use to establish a plan regarding where management ideally wants to take the company (budgeting) and whether it is actually heading in the right direction (financial forecasting). Although budgeting and financial forecasting are often used together, distinct differences exist between the two concepts. Budgeting quantifies the expectation of revenues that a business wants to achieve for a future period, whereas financial forecasting estimates the number of revenues that will be achieved in a future period.

Financial Forecasting and Budgeting in UAE selects the most economical sources of finance and estimates the total capital requirements. This will help to determine the future financial activities of a company. The financial plans are prepared to manage the expenditures and fulfil financial goal of the company.

Budgeting

A budget is an outline of expectations for what a company wants to achieve for a particular period, usually one year. Characteristics of budgeting include:

• Estimates of revenues and expenses
• Expected cash flows
• Expected debt reduction
• A budget is compared to actual results to calculate the variances between the two figures.

Reasons for financial forecasts in UAE:

• Lessen Financial Risks:
  The process of the business that consume most of the money can be detected with the help of Financial Forecast. The money can be pumped out of such processes to improve company's financial risks and make it a profitable one. Financial Forecast will help in giving a better idea of risks and tactics to avoid it.
• Better Cash Flow Control:
  Cash is an important part of the business and it is the main element the business manage first. Therefore, financial forecasting will help you to allocate funds to various tasks and help you guide in the right direction.
• Measure Financial Performance:
  The future financial performance is measured and is compared against the standards set by management. This is one of the crucial aspects of financial forecasting. This will help in identification of loopholes, corrective actions, and improving company performance.
• Acquire Financing:
  The investments can be acquired with the help of financial forecasting because the data that are presented before the investors will make you much more credible. Attaining business finances to fund the operations of the businesses will be much more easier.
• Display of Financial Viability:
  Financial Forecast checks whether the new business is financially viable. The projected expense and projected income can help you to get an exact idea whether the business will be good or not. It also helps to understand whether the strategies and plans designed is going to perform well or not.