Reference no: EM133380169

Question: Financial forecasting works hand-in-hand with budgeting. Indeed, a budget is a financial plan over a short-term planning period such as a calendar or fiscal year.

Most of us either participate in or observe the budgeting/planning process in our organizations. Certainly all of us are affected by it. Please comment on your organization's short-term planning process. You might include the important drivers in the process - sales targets, new markets and strategies, employee development. If you are in a governmental organization or non-profit organization, some or perhaps all the drivers are mandated by a political or other external process. How are the goals or targets established? Some departments are not profit centers that generate revenues, but provide needed services to the organization. Here other objectives drive a departmental budget that is more oriented to efficiency and cost control.

Perhaps some of you have experience with developing or using cash budgets, either those of your organization, or those of a client (such as a potential borrower asking for credit). If you have this experience, comment on how you utilize the budget to make effective decisions.

Try to link this budgeting process with performance and strategy. Does your organization develop forecasted (pro forma) financial statements to guide strategies? Does your organization look at results measured against previously established targets? Are midcourse assessments and adjustments made? How is your own performance linked with the overall planning and evaluation process for your organization?

For example Coca-Cola. According to their annual report, Coca-Cola uses a strategic planning process to set their short-term goals and objectives. They identify key drivers for growth, such as increased marketing investments, innovation in product offerings, and expansion into new markets. They also consider potential risks and uncertainties, such as changes in consumer preferences, competitive pressures, and regulatory changes.

Coca-Cola develops a detailed budget based on their strategic plan, which is reviewed and approved by senior management. They use various financial metrics, such as revenue growth, profit margins, and return on investment, to monitor their performance and adjust their plans as necessary throughout the year.

Coca-Cola also utilizes pro forma financial statements to guide their strategies. These statements provide a forecast of expected financial results based on assumptions about future performance. They help Coca-Cola evaluate different scenarios and make informed decisions about resource allocation and investment opportunities.

Employee performance is also linked to the planning and evaluation process at Coca-Cola. The company sets individual and team goals aligned with the overall strategic plan, and evaluates performance based on these goals. Regular performance reviews and feedback sessions are conducted to ensure alignment and progress towards the company's objectives.

This is a general how you can related these questions within your company. This is not related to a specific company. I hope it helps.