No matter how much forecasting your organization does when building a budget, something always comes along throughout the year to throw a wrench in your plans. Whether it’s poor sales or funding, unplanned expenses, or market shifts–it hits when you least expect it. That’s where a what-if analysis can help you avoid a budget shortfall.
A what-if analysis is an accounting tool that is used for exploring alternative scenarios to your current budget. Let’s say you want to get an idea of how increasing your employees’ hourly pay by a dollar will change your overall budget. With a what-if analysis, you can run the numbers to find out without changing your actual budget.
A what-if analysis is perfect if you want your organization to have a better plan for the future, a faster turnaround when facing setbacks, and for knowing when to avoid potential risks. So let’s review the ways it can improve your organization.