By Ethan Cummings, CPA
A financial forecast can help you can manage uncertainty in your business
It’s impossible to predict the future. For business owners, this is an especially hard truth to swallow. Peering into the unknown—with employees to pay and projects to deliver—can be downright overwhelming. Thankfully, there’s a way to lessen the blow uncertainty can bring: a financial forecast.
A financial forecast is a tool that estimates your business’ projected income and expenses at various points in the future (e.g., six, 12, or 24 months down the road). You can generate one using software that analyzes your business’ historical performance and industry trends.
Here are five ways a financial forecast can help you anticipate and adapt to change in your business.
Become a budgeting pro
Your budget is essentially a plan for where you want your business to go. But how do you know if the budget you’ve set is realistic? This is where a financial forecast can help. Referencing one when creating your budget allows you to consider your company’s past performance and market conditions. This leads to a budget and, ultimately, goals that are in line with what your business can handle.
Put your lender’s mind at ease
Having a financial forecast in hand shows that your business has a plan in place—something your lenders and creditors will appreciate. What’s more, it proves you’re prepared for unforeseen events that could impact your revenue or budget.
Being ready for whatever comes your way also means you won’t be blindsided by change. You’ll be better positioned to pivot, whether it’s finding ways to reduce costs or meet a surge in demand for your services.
Improve project management
A financial forecast allows you to predict which trends, good or bad, are likely to happen again. With this insight, you can better manage your performance and budgets on upcoming jobs. For example, if you’ve consistently fallen short or over budgeted for projects in the past, you can use this knowledge to confidently plan for what’s next.
Position your business for growth
All in all, a financial forecast gives you a point of reference—and a way to prepare for whatever the future may hold. Most important, it helps you envision how and where your business could grow.
If you’d like to generate a financial forecast for your business, we’re here to help you make the most of it. Contact us today to get started or learn more.