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:
1. 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.
2. 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.
4. 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.
5. 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.