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Financial Planning and Forecasting for a New Year

Eric Weynand, Founder
financial planning and forecasting

Before you know it, this year will come to a close, and a new one will begin. It’s an important time for businesses as they start the financial planning and forecasting for the year ahead. 

While it may feel like a massive project, savvy companies know that there are a few critical areas to master for successful financial planning and forecasting. 

Let’s take a closer look at what you need to know.

Financial Planning and Forecasting

Prep Work for Financial Planning and Forecasting

Before you charge into your planning, it’s vital to do the necessary prep work first. These valuable tasks set the stage for better decisions and save you time later in the process.

Reflecting on the Past Year

Making choices about where to go in the future requires a complete understanding of the past. Look back over the past year and identify specific achievements, challenges, and opportunities, whether or not you were able to take advantage of them at the time. 

Unfortunately, many businesses encounter the same issues over and over until they identify and fix them, so being clear-eyed about what’s held you back can help inform future strategy. 

Similarly, finding where things went right allows you to brainstorm ways to expand or replicate those results.

Setting Clear Financial Objectives

Surprisingly, many companies head into the year without a good idea of what they’d like to achieve financially. It can be helpful to use the SMART goals model – crafting goals that are:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Timely

Because of their attributes, SMART goals are more likely to be accomplished. 

Refer back to these objectives throughout the rest of the financial planning and forecasting process to ensure things are staying on track.

Concentrate on These Key Areas of Financial Planning and Forecasting

So, where should you focus your efforts for the maximum benefits when financial planning? 

Zero in on these key areas.

Comprehensive Budgeting and Expense Management

What’s more important than how your organization is spending its cash? Careful budgeting is critical to making the most of always-precious funds. Leaders and department heads should be as detailed as possible here, looking to get the most granular accounting of expenses and budgeting possible. 

Using the previous year’s spending as a baseline can be a good starting point, allowing you to tweak as necessary when you find areas that need more money than expected or have excess left over.

Revenue Forecasting and Growth Strategies

Everyone wants their business to grow, but the best companies take the time to work carefully on how they see that happening. 

Start with your revenue or profit goal for the upcoming year, then work to determine the proper strategies to get there. This could range from slight tweaks to current procedures to dramatic overhauls of processes.

Cash Flow Management for Stability

Nearly as important as a company’s overall profit is whether or not it has the necessary cash on hand to allow operations to run at full efficiency. 

Cash flow management is critical to ensure an organization limits its financing costs, can take advantage of opportunities, and is prepared for unexpected pitfalls. This can involve everything from ensuring prompt collection of accounts receivable to monitoring expenses and working with creditors and vendors to manage payments effectively.

Tax Planning and Compliance

Taxes may be one of life’s unavoidable hassles, but proper tax planning and compliance efforts can pay significant dividends. 

Firstly, it’ll make filing far easier by ensuring you’re properly monitoring employee or contractor pay, potentially deductible expenses, and other items your accountant or financial team will appreciate when preparing your return. 

In addition, thinking ahead can seriously reduce your tax liability by taking advantage of:

  • Deductions
  • Credits
  • Preferential tax treatment
  • Other factors

Financial Reporting and Analysis for Informed Decisions

As the year progresses, producing and monitoring the correct financial reports is vital. These will give you critical information on how your financial situation is developing, which is especially valuable to compare to your projections. 

By spotting trends or anomalies, leaders can adjust as necessary to make the most of the rest of the year with the best and most recent data.

Resource Allocation and Investment Strategies

Every company deals with scarce resources, whether it’s:

  • Money
  • Personnel
  • Equipment
  • Other factors

Put extra emphasis on ensuring these are being used appropriately and efficiently, as this can be one of the most important factors in the success of your organization. 

Likewise, investment strategies deserve plenty of attention, whether it’s how you invest in growth for the company or making the most of funds that aren’t currently being used.

Financial Planning and Forecasting

Need Help with Financial Planning and Forecasting for the Year Ahead?

While business leaders are always busy, making time for proper financial planning and forecasting is undoubtedly one of the most impactful things they can do all year. It sets the stage for success in the months ahead and keeps things on track, even when the world produces unexpected challenges. But it’s not just a one-off task – it’s vital to continually monitor your results and adapt when you can. 

Fortunately, PlotPath’s experienced financial professionals have assisted countless organizations in their quest to plan and forecast for the year ahead. Contact us today to learn more about how we can help and to get started looking ahead to 2024.