Impacts Of Financial Forecasting In The Strategic Growth Of A Firm (Essay Sample)

Financial Forecasting
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Introduction
A financial forecast is a projection of the anticipated finances in terms of income, revenue and expenses. It gives a firm a reasonable idea of the anticipated revenues over a given period of time. This is essential to the strategic growth of the firm involved. Financial statements are also required in financial forecasting to ease the task of coming up with a business strategy. A firm has to come up with an accurate financial forecast to avoid business failure.
Discussion
Financial forecast should not be confused with a financial plan. Forecasting involves estimations, projections and anticipations of future finances. On the other hand financial planning involves clearly stated steps to generate and manage future finances. It is important to note that financial forecasting is a key consideration before coming up with a financial plan. Therefore, a financial forecast will highly affect the content of the financial plan.
A business plan is a tool for strategic planning which eventually if followed by strategic business growth. A financial forecast tries to predict what might happen in the future in terms of revenue and expenditure of a firm. This anticipated ensure that as a business lays down strategic steps it covers a given period with a general expectation. Planning also involves seeking financing. A forecast will project when the firm will need external funding and thus can be used by a bank as an evaluation resource before lending out a loan (Grant 2016). Therefore, financial forecast is important is seeking financial help which is important in achieving strategic growth goals of the firm.
Very many risks face a business; that it why every entrepreneur needs to be a risk-taker. Unprecedented risks are the major causes in business failure. A firm that has a capability of foreseeing impeding risks will always have an upper hand in the market. This is what sets apart firms that are able to experience achieved strategic growth to be multinational and those that fail as startups (Bracker, Keats & Pearson 1988). A well modeled financial forecast is able to foresee the expected and even at times unexpected risks and helping a firm in coming up with strategic growth plans that cater for the occurrence of the risks.
Innovation is an important tool in strategic growth of a business. Firms that exhibit continued growth are always coming up with new products and ways to ensure the market is hooked up to them. A financial forecast is important when a company is to release a new product or employ new techniques into the market. The forecast will try to project the cost that the firm will undergo when launching a new product and the expected income that such products will earn the firm (Rhyne 1986). If the forecasting is precisely done, the firm will take measures to ensure that the business benefits maximally from the release of new product.
A firm may use relevant employees to come up with a business forecast or may employ experts to do so. Whoever comes up with the business plan, they will be required to use financial statements. Financial statements help keep records of the business transactions. Forecast ideas are based on the firm’s financial sta...