How cash flow forecasting and an accurate sales forecast can improve your company's performance

Great companies make sure they are prepared to deal with success by forecasting growth and considering different scenarios of how the future might look. Cash flow forecasting, a sales forecast and scenario modelling can be driving forces in decision making and decreasing uncertainty. That means they know where to invest, how to allocate resources and what preparations to make for each stage of their journey. Looking at historical data is no longer enough to run a business.

That has always been easier to talk about than achieve.

But, like every other area of our world, new technology means that now it’s easier than ever for even the smallest of SMEs to plot a detailed path from local to global superpower.

So how best can you predict your growth and set out to take on the world?

To predict the future you need to understand the present

Forecasting is key. You can’t grow without knowing what you have to build upon. Think of it as a health check – shining a light into every nook and cranny of your organization (e.g. cash flows) and revealing what needs a little boost or trim.

You need to consider all your outgoings and ingoings; what your staff situation and hiring needs are; what assets and liabilities you possess and so forth. Once you have this in place, you are in a position to start forecasting.

Now you are no longer making decisions based on hunches but facts. You’ll be able to see what needs addressing, what needs investing, and even what needs axing. A path to prosperity should start to emerge.

Manage your financial data, don’t let it manage you

A critical factor in forecasting is how you manage your financial data. Do you spend an hour sorting it out now, or several hours every month digging yourself out of your backlog? Too many entrepreneurs don’t get this bit right and suffer continuously.

Spreadsheets are fine when you are starting out and only have a handful of clients. But this isn’t a scalable, reliable process and the more business you get the less effective it becomes. You can easily end up spending more time with Excel than working on your bottom line.

Innovations in cloud accounting mean SME owners can now make their data accessible in real-time when and wherever they want it.

This changes the game. Because with your data in the right software, you can move on from using your accounts as a historical, backward record to utilising it as something that helps you make better decisions today and plan for the future of your company.

Multiple opportunities (scenario planning)

One of Futrli’s biggest strengths is that one accurate forecast can drive multiple different scenarios and this can fuel daily decisions - scenario modelling informs your company's decision making and helps improve your long-term cash position. Creating your forecast used to be a heavy-lifting piece of work that usually was printed out just once, sent to the bank, and then left to sit on a desktop – perhaps never referenced again (or at most dusted off once a year). Even worse, it could easily just look like a wall of numbers, rather than a practical, living document that helps you plan.

Once you have your forecasts in place with Futrli, it takes seconds to visualize different scenarios. If you want to see what winning that coveted client would do to your annual profits, then it can be visualized with just a click or two. Furthermore, you can run scenarios simultaneously and view them side by side, helping you get a better grasp of your options and take the fear away from making the wrong decision.

The success you can see

Good forecasting, e.g. sales forecasts or a cash flow forecast, and scenario planning can both secure and accelerate your SME’s growth.

Nobody can ever know 100% what the future holds, but firms that invest in forecasting are at a major advantage over those that don’t.

History is full of companies with great ideas that fell by the wayside due to a lack of foresight and planning. But with Futrli future-proofing your business, you don’t need to be one of them.