I can’t stress enough the difference a business forecast makes.
As an accountant, it’s common to see small business owners come to us without an ounce of planning; stressed and worried worried about the stability of their company or what tomorrow will bring.
There are usually two reasons why small business forecasting is left unchecked: 1) You just don’t know how to do it, or where to start, and 2) Because your business is running smoothly and cashflow is good, it seems unnecessary and costly. In this case, sitting on your hands and doing nothing could be more costly in the long run.
Whatever the reason, you can’t leave your business surrounded by uncertainty and vulnerability. Flying by the seat of your pants in business is both nerve-wracking and holds major risk.
Today, I’m here to share some insights as a business advisor and small business consultant. You’re here because you want to start making well planned and factual decisions. Decisions that safeguard your business from harmful blunders or from missing out on opportunities because you neglected to make any decision at all.
My aim is for you to leave with a newfound respect for business forecasting and the tools that guide your path forward, be it a month or a year down the line. Ideally, you’ll soon find yourself feeling more at ease about your business’s stability and future prospects
“Even a profitable business with a steady income can face cash flow issues or, worse, go bust!”
First thing you need to understand is, a financial budget and forecast are not just fancy accounting exercises, but your business’s navigational tools. They provide clarity and calculate potential cash flow issues before they arise. They ensure that your business isn’t just surviving, but thriving and prepared for whatever lies ahead.
Many believe that as long as the cash register keeps ringing, their business is on the right track. However, this assumption is far from the truth. Even a profitable business with a steady income can face cash flow issues or, worse, go bust. It’s a common misconception that profitability directly translates to financial health, but without a proper business forecast, you’re essentially flying blind.
Another aspect that many overlook in their business planning, is the impact of tax obligations and the ever-changing landscape of rules and laws. These can significantly affect decision-making and, if not properly managed, can lead to unpleasant surprises. Awareness and preparation are key to steering your business clear of these potential dangers and making the most of incentives and opportunities that are ever-present for small business owners.
Forecasting, Planning & Budgeting
As much as I dislike cliché sayings, I feel this one especially rings true for both large and small business owners – “Failing to plan, is planning to fail”. A good business forecast isn’t just nice-to-have; it’s essential to prevent your business from making costly errors and provides clear direction towards your future goals at the same time. I know that I check mine monthly at a minimum and refer to it when making financial decisions.
Larger and more well-run outfits don’t rely on guesswork or leave things to chance. They have the proper business advisory and accounting solutions set in place. Their future is anchored in robust business forecasts, budgets and financial plans to guide them.
If your still unsure of where the practicality lays, here’s a few examples:
- Seasonal Fluctuations: Supply stores apply business forecasting to anticipate seasonal sales fluctuations. By adjusting their budget and inventory in advance, they maximize profits during peak seasons and reduce unnecessary expenses during slower months, maintaining a healthy cash flow year-round.
- Expansion Plans: A startup relies on business forecasting and budgeting to assess the feasibility of expanding into a new market. This strategic planning ensures they allocate resources effectively, mitigating risks and maximizing the potential for success in a competitive landscape.
- Cost Management: A freelance agency uses budgeting and forecasting to predict and plan for periodic expenses, such as software subscriptions and hardware upgrades. This proactive approach prevents cash flow issues, allowing for smooth operations without financial strain.
- Economic Downturns: During uncertain economic times, companies utilize business forecasting to prepare for potential downturns. By adjusting their budget to reduce non-essential spending and focus on core activities, they safeguard the company’s stability and are ready to bounce back when conditions improve.
If you find yourself unsure about the financial future of your business, lacking a clear financial forecast, or simply not knowing what steps to take next, you might want to do something about it. Otherwise, you’re unnecessarily setting yourself up to fail. Business owners have a responsibility to their staff, suppliers, customers and most importantly themselves and their families to ensure they are maximising the time and money that is invested in their business.
However, tackling this without the necessary experience or knowledge can also be a risky endeavour for any business owner. These processes are intricate, requiring a deep understanding of financial principles, market analysis, and predictive modelling. Attempting it without the proper background or a proper business advice can lead to inaccurate forecasts or unrealistic budgets, potentially steering your business in the wrong direction.
Also, I must mention – avoid using ‘Budgeting and Forecasting’ templates you find online. Successful results rely not on the tool you use, but significantly on the quality of the data you input. While you may end up with a professional looking spreadsheet, it doesn’t mean it’s useful.
If you’re unsure what to do, seek professional business advice. Neglecting to, can not only be costly but may also lead to critical errors that could have been avoided. The cost of complacency is far higher than the investment in professional business advisory or professional accounting for small business.
Afterall, these things are best handled by those with experience, leaving you with more time to focus on your business and the things that really matter.
I really hope this help – not only with the success of your business, but in giving you that extra bit of confidence and encouragement as a business owner.
Don’t be afraid to hit me up if you have any further questions. A short message or a quick phone chat is all it takes to get you off in the right direction.
Good Luck!
If you want to know where your business is headed and the path to get there, our Business Advice & Consulting team have the skills, knowledge and tools to help you succeed.
Any advice on this site is general nature only and has not been tailored to your personal objectives, financial situation and needs. Please seek personal advice prior to acting on this information. Any advice on this website has been prepared without taking account of your objectives, financial situation or needs. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your objectives, financial situation or needs.
