Last updated on October 15th, 2021 at 12:50 pm
Companies are dynamic bodies. Companies also operate in dynamic work environments. Therefore, it is essential to keep a check on various aspects of a business, including the financial as well as the planning process. Financial analysis is an integral part of any business. It should be conducted with the utmost precision and care as it determines the viability of the company. Financial analysis, as well as planning, are considered to be fundamental tasks when it comes to running a business. You can also take up an economic analysis course to understand how the process is conducted and what things have to be taken care of. There are different steps involved in the financial analysis and planning process of a company. The planning is done to achieve both short term and long-term goals of a company. Also, profitability is the primary goal any company wants to achieve. The financial analysis and planning process is aimed at attaining the profit objective of the company.
Forecasting
It is a critical step in the financial analysis and planning process. Planning for the future is a vital element for any company. Forecasting is that tool which does planning for the future possible. A financial analysis course will help you understand how businesses forecast and make decisions. Forecasting helps in building or formulating a sales strategy which will take into consideration all the future possibilities that can arise at any point in time. Both internal and external conditions are taken into consideration while forecasting results and possible courses of action. Tools like Hyperion Planning can be used to conduct the forecasting process efficiently. Here, the past trends are also taken into consideration to come up with predictions.
Budgeting
Budgeting is a crucial step in the planning process. You need to take into consideration the planned expenditures before actually incurring those expenditures. Budgeting for fulfilling the short term and long-term objectives of a company is a fundamental process. Budgeting is done to assess what kind of spending is coming your way. Budgets are prepared after considering the past trends as well as taking future requirements into account. A yearly budget is ready, and then it is segregated to monthly charges were recurring, and one-time expenses are segregated and recorded. This is done to understand the financial requirements of the company.
Reporting
Reporting is another important aspect of the financial analysis and planning process. Recording every financial transaction is an essential step that needs to be followed by every company. Financial reporting is done keeping in mind the interests of both the internal and external shareholders. Internally, managers need to know the financial position and standing of the company. Managers also want to see the profitability of the company, and that makes reporting important. When it comes to external sources, financial reports are used for competitor analysis. Also, auditors require financial information to understand how the company is performing and even if the company has recorded every incident responsibly. Investors also want to go through the financial data of the company before investing in the company.
Analysis
The analysis of financial statements is a significant step in the economic analysis and planning process. Analysing the expenditure and investment patterns is very important for a company. If a company overspends, there is a strong need to understand why such a cost has occurred. A complete analysis of all factors is required to realise the controllable and uncontrollable elements that are driving such expenses for a company. The financial analysis also involves calculating ratios and understanding the overall position of the company
