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Financial projection in a recession

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Financial projection in a recession

The rapid of Russian market in last decade didn’t require deep analysis thorough prediction. Financial projection replaced plans. Figures were taken as a basis for the past several years, and were determined by a positive trend, which was planned in percentage parity. The error was compensated for the high yields and rising prices.

When all this was absented, the only tool for the financial stability of the company was careful projection

In management accounting, which is the foundation for enterprise management and decision making, planning must always precede the projection. The more accurate the projection will be fulfilled – the budget will be better, which is the basis of management accounting. According to the company’s business model the budget of sales planning depends on the projection, depending on the budget of sales generated budget costs, etc. Therefore, even in a recession at the correct financial projection we are able to maximize certainty affect on the financial stability of company.
Financial projection – creative process, which is based on intuition and logic, identify causal relationships and trends.
All leaders of all services in the company should participate in collecting the basic analytical information, its primary processing and subsequent analysis. For the projection and subsequent planning during of economic instability and stagnation of the market, it is best to use short-term (one year) and operational (several months) forecasts. This will give greater flexibility and operational response to the situation. Projections should have at least two scenarios: optimistic and pessimistic. This will help to take operational decision and to maintain stability in the worst developments. The most terrible is not work for a bad scenario, the worst were not ready to work in such conditions.
To provide a better prediction it is necessary to separate the environment on foreign and domestic. External include everything you are not able to influence, but this determines the total market of some goods and services in the near future (macroeconomics, legal acts). Internal include all the events, objects and processes on which you can exert influence. The object of projection is directly market on which you operate.
Not all information is objective and true. But when it is too much usually starts working the average number and the overall picture becomes clear. The main rule – a systematic and regular data collection and analysis.


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