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MODULE 3: PLANNING, BUDGETING AND FORECASTING :smiley: - Coggle Diagram

- - - - 1. Launching the Model Y
        Tesla planned to introduce a new car called the Model Y, which is a compact SUV.
        This was important because SUVs are very popular, and the Model Y would help Tesla attract more customers.
      - 2. Building the Shanghai Giga Factory
        Tesla started building a big factory in Shanghai, China.
        This factory was crucial because it allowed Tesla to make cars closer to Chinese customers, reducing shipping costs and avoiding import taxes.
        It also helped Tesla expand its presence in the world's largest electric vehicle market.
      - 3. Improving Production Efficiency
        Tesla aimed to make their car production process more efficient.
        This meant finding ways to build cars faster and at a lower cost, which would help them meet the growing demand for their vehicles and improve profitability.
  - - - 1. Initial Forecasting:
        :!!: Before creating a budget, business often start with a forecast. This involves predicting future revenues, expenses, and other financial metrics based on historical data and market trends.
        :warning: Example: if a company forecasts that sales will increase by 10% next year, this info will be used to set realistic revenue targets in the budget.
      - 2. Creating the Budget
        :!!: Using the forecast as a foundation, company then creates a detailed budget. This budget allocates resources and sets financial goals for different departments or projects.
        :!!: Budget will include specific targets for rev, exp and other financial metrics, based on the initial forecast.
      - 3. Ongoing Forecasting
        :!!: During the year, company continue to update their forecasts based on actual performance and new info. This helps them adjust their budgets and make informed decisions.
        :warning: Example: if actual sales > forecasted, the company might revise its budget to allocate more resources to production or marketing
      - EXAMPLE: A COFFEE SHOP :star:
        :fire: Forecasting VS Budgeting
        
        Revenue
        
        Forecasting:.
        
        Scenario : :silhouettes: You analyze past sales data and notice that your coffee shop's revenue tends to increase by 15% during the summer months due to higher foot traffic.
        
        Forecast : :pencil2: Based on this trend, you forecast that your rev for the upcoming summer will increase by 15%. If you made $10,000 last summer, you predict making $11,500 this summer.
        
        Purpose : :red_flag: This helps you anticipate (predict) future rev and make informed decisions, such as ordering more supplies or hiring additional staff.
        
        Budgeting
        
        Scenario : :silhouettes: At the beginning of the year, you set a rev target for your coffee shop. You aim to achieve $125,400.00 in rev for the year.
        
        Budget : :pencil2: You break this down into monthly targets, planning to make $10,450/month or:
        
        Jan:$7,000/month;
        
        Feb & Mar: $8,000/month;
        
        Arp - Jul: $12,500/month
        
        Aug - Oct: $10,000/month and
        
        Nov & Dec: $11,200/month.
        This budget helps you set financial goals and track your progress.
        
        Purpose : :red_flag: This provides a roadmap for your financial goals and helps you allocate resources to achieve these targets.
        
        Expense
        
        Forecasting
        
        Scenario : :silhouettes: You review your past exps and notice that utility costs tend to rise by 10% during the winter months due to heating.
        
        Forecast : :pencil2: You forecast that your utility expenses for the upcoming winter will increase by 10%. If you spent $1,000 on utilities last winter, you predict spending $1,100 this winter.
        
        Purpose : :red_flag: This helps you anticipate higher exps and plan accordingly, such as setting aside extra funds.
        
        Budgeting
        
        Scenario : :silhouettes: At the beginning of the year, you create a budget for your coffee shop's expenses. You allocate $13,050 for utilities for the entire year.
        
        Budget : :pencil2: You break this down into monthly allocations, planning to spend $1,087.50/month on utilities or:
        
        Jan - Mar: $800/month
        
        Apr - Aug: $1,250/month and
        
        Sept - Dec: $1,100/month.
        This budget helps you control costs and ensure you don't overspend.
        
        Purpose : :red_flag: This provides a structured plan for managing expenses and helps you stay within your financial limits.
    - - Rolling Budget : :star: indeed a part of budgeting and is designed to be updated frequently.
        As :pencil2: one period (like a month or a quarter) ends, allows organizations to adjust their financial plans based on recent performance and changing circumstances, making it a more flexible and responsive budgeting method