As we enter a new financial year, most companies have been through the process of financial forecasting or budgeting.
Notwithstanding, as argued before, that a 12-month cycle may be too long a time-frame for such a process it is a requirement for various reasons. It also does provide the basis for medium-term planning.
The annual ritual of budgeting takes various forms depending on the size of the organisation. Commonly this entails reviewing past performance and estimating as accurately as possible what lies ahead.
In good times, incomes and correlating expenses are increased. In tough times, as we may be presently experiencing, these tend to take a downward trend.
Environmental, political, economical and other known factors are rightfully included in these forecasts.
There will also be some products, services or business units that are at the start or end of their life-cycle, these too will have an impact on financial performance.
However, organisations must do more than just budget for the year ahead based on recent history. They must actively plan for growth.
This includes organic growth, acquisitions and strategic opportunities. All organisations must also have at least one person, department or team focussed on interpreting the fast-changing landscape and how to respond to it.
Reflecting this focus with financial forecasting and resources allocated ofr the purpose ensures that growth is constantly in the forefront of management, the board and the organisation at large.
A growth budget, and by growth, I refer to profitable revenue growth, must refer to the strategies that the organisation intends to pursue and the greatest allowable funding that may be allocated to ensure it can maximise results and performance in these areas.
As with all planning, everything changes when reality bites, but, where possible, these activities and funding for it must be maintained regardless of how the normal operations are performing.
Growth strategies are usually the first to be abandoned when the standard operations of an organisation face hurdles or downwards trends. But often it is in these times that growth and innovation requires the greatest attention.
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