WHAT’S A FINANCIAL FORECAST?

A financial forecast provides an essential roadmap of your key fiscal indicators (like profit, cash and balance sheet value). It reveals what your finances might look like in the future based on several potential scenarios that you determine. You predict what your monthly sales and costs might be over the next few years (usually 3-5) and from these an accurate model is developed to show an expected profit & loss, balance sheet and cashflow.

WHY DO I NEED ONE?

Not having a financial forecast is like walking in the dark without a torch and can result in sleepless nights. By contrast, armed with a forecast you can clearly see the impact of various possible futures on your finances. This allows you to make better decisions and provides you with reassurance. And because a financial forecast includes a balance sheet and cashflow, you can see the changing value of your business and how future trading impacts on your cash requirement. This is essential in ensuring you don’t run out of money. And if the forecast shows you require extra funds for a period of time it is the perfect tool to share with your bank to persuade them to lend to you.

HOW DO I CREATE ONE?

You start with your expected sales and costs. Then you’ll need an experienced management accountant to help you turn these into the full model. It should only take a few days’ work depending on how complex your business is. But the result will be worth the time spent. With the forecast in place, each month you can compare your management accounts against the model to track the progress of your business performance. You will find this very reassuring.

QUESTIONS TO CONSIDER

- Is my financial forecast up-to-date?

- How could a financial forecast improve the way I manage my business?

- Do I know what profit to expect this year?

< Back Next > Contents > Home >

© Secantor Business Services Limited