How Often Should Businesses Forecast their Financial Future?
Posted on 30th March 2017 in Business
Written by Freya Hughes
It was predicted at the beginning of 2016 by The Huffington Post that Prince William would reign by now, and make some serious changes to dismantle the British royal system. They also thought Hillary Clinton and Jeb Bush would be fighting it out to be President in the last weeks of the US election. It goes to show, it is impossible to predict that madness that can ensue in the space of just a year but that doesn’t mean you shouldn’t bother. Forecasting change in your business is the only way to put yourself in a position to be able to react.
Forecasting is a great way of giving yourself multiple contingencies for a given event. While we may not always be able to shield ourselves from political upheavals, coronations or instabilities in the financial market, Forecasting change is the only way to keep your business protected.
Monthly or weekly, frequency is key
A myriad of external factors are out there waiting to be tackled. Forecasting once in a blue moon simply won’t cut it. The market will peak and trough, new competitors will appear, customers will drift away and staff will turn over – these situations are, unfortunately, unavoidable. So, don’t put Forecasting in the ‘that’s a job for later’ pile, do it frequently – when you think your business needs it. We are biased, but we’re also control freaks, so we like to know where we stand at all times. If you want to be confident and on top of where you’re heading, we’d advise you do it at least weekly. We understand that using software that isn’t necessarily designed for predictions can make the whole thing a challenge, so using real-time software will make this task a whole lot quicker and more efficient.
While many of us fear change, in business it can be something to be embraced. Forecasting for it will expand your thinking and get a deeper understanding of your company. Keeping close tabs on your financial positioning can translate your goals into specific targets and make you take a step back and see the bigger picture. Using Scenario Forecasting, anticipate and combat these factors by taking a new route. Your historical data is a tool to be utilised, but the more regularly you update your assumptions the more relevant your forecasted data is.
Save time later and do it now
Business owners working long hours might simply not have the time to do any financial planning. We understand that after a 70-hour plus week, dealing with a mountain of figures on a Sunday night may not be the most appealing task. If you’ve left it until the last minute and your brain is fried, then things will stop making sense. You’ve now got two options: put it off for even longer, or make decisions that are potentially based on errors. Not only will both end in more work overall, your plan is only as truthful as the numbers in it so getting it right first time is crucial. So embrace your Sunday nights and
enjoy your downtime, trust us, it is as important for the longevity of your business.
Your budget will help you determine your Forecast. Think of it this way: your budget is a static from point A to point B guide, while your forecast is your GPS. Your business is changing direction constantly so re-Forecasting often is essential. This can be daily, weekly or monthly – whatever your business demands. It’s all about adaptation: there are a plethora of uncertainties out there, which could change the way you operate at a moment’s notice.
Stop beating yourself up with admin
If you’ve read this but you still don’t want to do it weekly, the chances are that you’re probably using the wrong tools and, if you’re using spreadsheets or desktop apps, we don’t blame you. Pulling data from the Cloud every day, FUTRLI automatically vacuums up your figures from Xero/Quickbooks. Pulling them in, it’ll then be able to create rolling Forecasts. In turn, you’ll be able to keep track of the financial state of your business in real-time. Updating as often as you feel is necessary will allow you to make better decisions based on facts.
If you’re struggling with how to begin, have a look at the FUTRLI how to guides. Things to bear in mind with Forecasting include the changes you’d like to see in your business, changes to the market, and your objectives and goals – not only for the year but longer term.