Financial forecasts assist in managing your finances. They are future predictions of your business finances, as compared to statements, which provide details of actual results of progress.
The following are five ways forecasting can help your business:
- Focus on the Future
By forecasting on a regular basis, it forces you to continually think about your future and where your business is headed. This will allow you to foresee changing market trends and stay ahead of your competition.
- Customer Satisfaction
Keep your customers satisfied by providing them with the product they want, when they want it. The advantage of forecasting in business will help predict product demand so that enough product (or staffing) is available to fill customer orders particularly if demand is seasonal.
If you expect to apply for a loan or line of credit, your financial institution will likely ask you to provide them with forecasting reports with your submission.
- Cash Flow
Forecasting can give you the intelligence to anticipate a downturn in sales and plan for it. Likewise, it can alert you to periods when you can expect an increase in sales and you can organise additional staffing ahead of time.
- Progress Towards Goals
If you can’t measure it, you can’t improve it. Setting goals alongside your business forecast allows you to track your progress and plan your operations that are aligned to what you want to achieve.
Your Accountant is the best place to start to undertake a forecast for your business.
Using Financial Forecasts to Drive Growth and Profitability
Nicole and John McGee started Busy Bee’s Cleaning Service five years ago. The business services homes, offices, schools and corporate clients.
While Busy Bee is a terrific business with strong revenue, it could not turn a profit. After deciding to end a large labor hire contract and losing more than 60 team members, Nicole and John were unsure how the business was going to survive and were desperate for professional advice.
Nicole and John contacted their Accountant. They needed urgent advice and help to update their business plan and financial forecasting. The Accountant assisted them to reassess their business mission and value proposition, generate accurate financial models for the business and advise on business growth strategies.
Benefits to the Client
“Initially, I was concerned that the sessions would only show how bad our situation was, but I was pleasantly surprised. In fact, having the models informed us about different options we had and has become a valuable tool for the future of our business,” said Nicole.
Nicole and John now operate with confidence knowing how profitable each job is. They had to increase their charge-out rate but now have a clear understanding of the profit margins on each job they undertake. Their newfound confidence shows in their sales pitch and conversations with customers and ensures that they are in control of their business.
Ask for expert advice, use mentors or talk to your Accountant.