Archive for category: Finance

Both financial forecasting and financial projection are essential financial tool for your business. These tools are used to estimate future financial performance. Both tools help business plan, but forecasting is more about predicting with data. While projections contains planning for the future based on assumptions and goals. We can make differentiates from them through their purposes,methodologies and time frames.

Financial Forecasting

Definition
This tool is used to predict future outcome based on past performance and current trends.
Purpose
To estimate a company’s financial situation over a specific period.
Approach
It is based on data-driven technique. Use historical performance, market conditions, and current data to make predictions.
When to use
If you need to plan for the coming year, then use financial forecasting.
Forecasting is best to predict the nearer term predictions.

Financial Projection

Definition
This tool is used to estimate future performance based on assumptions and strategic planning, over a long period of time.
Purpose
It helps to make plan for long term goals, and assist investors and preparing for the future needs.
Approach
It is goal oriented technique, and tend to consider various potential scenarios.
Use potential strategic assumptions like planned new product launches, entering new markets, or increased marketing efforts
When to use
Based on your financial forecasting, make financial projection for the next year and beyond.