The Importance of Vision in Financial Planning for Your Business

When creating forecasts and budgets, companies usually look to the past for historical data to guide their plans. The past is a rich source of information to help you understand what has happened in years prior. However, it can be a dangerous thing to depend too much on, as relying solely on information about what has happened before will only serve to get you to the same place you’ve been, or only a little farther.Modern organizations must be ready to make bold moves when the environment is right. To be able to do that, businesses and their finance teams must look in both directions – to their past, but also into the future to discover if and when it’s possible, and reasonable, to take the steps that will get you where you want to go.

Planning for Future Business Goals

Business goals can be as unique as the people who run them. For one organization, it might be growth. For another, removing debt. Perhaps your organization is looking to expand into new markets or build out a robust research and development practice.Regardless of what your business goal is, having a plan in place ensures that decisions are made that move the organization toward that goal. Supporting that plan requires having the appropriate resources and implementing them at the right time. Your business and financial plans are two halves of the same coin. By using your plans to shape your budgets, you’ll have a clearer picture of how to use resources to effectively reach your goals.

The Importance of the Past in Financial Planning

This isn’t to say that historical data isn’t important to the planning process. In fact, it’s a critical component to filling in some of the baseline information needed to budget for the future.Data from previous years can tell you what your typical year over year sales increase is, or how much manufacturing costs increase over time. However, simply looking at sales data may not give you the full picture. The office of finance is a hub of information that can be analyzed to find key insights from past data.

Marrying the Two for Business Success

Using both historical data and plans for the future, finance teams can give their business partners a clear direction when it comes to intelligent budgeting and decision making.Intelligent budgeting requires a broad understanding of data across multiple disciplines – a position that finance is in a unique place to supply. Because of their position, which cuts across all business functions, they have access to historical data from throughout the organization. This gives them a unique perspective to be able to find cause and effect and even influential situations that might not be seen within an organizational silo. These situations can then be avoided or exploited when they appear in the future, depending on the company’s goals.The office of finance can also use business goals and historical data to play out various potentials. As budgets are formed around future goals, the finance team can build out multiple “what-if” scenarios. This scenario planning can call out key decision points and ensure that data-driven choices are made.Propelling a business toward a successful future requires many elements to fall into place. A clear path toward your goals and the financial plan to get there are crucial. For these pieces to be accurate, companies must rely on their plan for the future and their data from the past to make the right decisions that drive them forward.‍