Financial forecasting is a vital process to ensure your business develops, weathers crises, and reacts to changes in the market when they arise. When done in the right way, forecasting can ensure your business balances its cash flows, improves its profit. It can motivate you to work towards goals, and raise confidence in both you and your clients. In this article, I want to explore forecasting and how you can maximise the results of the process.
Forecasting can help your business:
- Balance cash flow to reduce bank charges
- Increase confidence allowing you to better assess risks
- Inspire confidence in people to lend you money
- Successfully react to changes in the business market
- Stay ahead of your competition
- Progress towards goals
- Improve profit by balancing costs to sales
Should I take an umbrella today or should I wear shorts?
We use forecasts all the time in our everyday lives to make decisions.
Take the weather forecast: we use it to decide what to wear, what time to go out, when to take our holidays. We accept that the further ahead we look, the less certain the forecast is, but we still use it as a vital tool as part of our planning. Those forecasts are every bit as vital to running our businesses.
Take the time to look ahead
In both good times and bad it is important to spend time looking to the future. Regardless of the size of your business, preparing a financial forecast will inform your decision-making today in order that you can make the most of opportunities and take steps to minimise risks, as well as identifying potential cost-savings. A financial forecast can help you to set goals for your business and measure your progress as you work towards them.
Ask yourself ‘what if?’
A good forecast will include a range of different scenarios in order that you can assess how your business will respond in a variety of situations. This has become increasingly important in today’s uncertain environment. Preparing financial forecasts is one of ways you can equip yourself with the knowledge that will enable you to make key business decisions quickly.
Revisit the forecast regularly
To keep your forecast relevant and to provide you with up to date information you should review the assumptions regularly. This will allow you to constantly refine your methods and learn from incorrect estimates. Comparing forecast to actual results will help you to identify additional steps that you may need to take to protect or develop your business. We would recommend that you review your forecasts at least quarterly to ensure the information remains current.
How we can help
Whether you need assistance with preparing a financial forecast or you would like to discuss an existing model to improve your decision-making process, we are here to help. We will work closely with you to ensure that the forecast reflects the key aspects of your business and that it can provide meaningful information to enable you to make the right decisions at the right times.
Get in touch for more information on how we can help you.