Thrive, Don’t Just Survive: Why Financial Forecasting Will Accelerate your Business Growth
Posted on 2nd March 2017 in The Forecast
Written by Amy Harris
It doesn’t matter that you have purchased the best crystal ball the world has to offer, nobody can ever know 100% what the future holds. However, businesses that invest in financial forecasting are at a major advantage over those that don’t. Don’t put a ceiling on your success, with foresight and planning, you are in control of your future.
Successful businesses don’t succeed just because they have a great service or product. They thrive because they are prepared for what’s ahead.
You’ve probably already guessed what their secret is because it is a not-so-secret-secret that we ‘heart’ forecasting. And we do because it is true and you should too. Companies who thrive ensure that they are prepared to deal with success by forecasting growth and considering different scenarios about how the future might look. That means they know where to invest, how to allocate resources and what preparations to make for each stage of their journey.
This isn’t just about cash flow, it is about growth and not allowing opportunities to run off into the sunset before you’ve even identified that they exist. Let’s explore how you get there…
To predict the future you need to understand the present
You can’t grow without knowing what you have to build upon. Think of it like a health check – shining a light into every nook and cranny of your organisation and revealing what needs a little boost or a diet plan.
Take last year as a starting point for example, what does that look like if you use this as a basis for your forecast? With zero changes being made to the organisation. Get into the habit of playing – have multiple browsers open so you can check your visualised Dashboards as you go.
You need to consider all your in and outgoings. What’s your current staff situation and hiring needs for the next 6-12 months? Where do you generate your income? Is this set to change? Can you move clients onto retainers? What assets and liabilities do you possess, and so on 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 on 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 repeatedly from making the same mistake.
Spreadsheets are fine when you are starting out and only have a handful of clients. But this isn’t a scalable, reliable process. The more business you win the less effective it becomes, so at the time you should be celebrating…you can start to panic.
Innovations in cloud accounting mean SME owners can now make their data accessible in real-time when and wherever they want it. This has changed the game. With your data in the right software, you can move on from using your accounts as a historical record to utilising it as something that helps you make better decisions today to avoid risk and plan for a successful future.
One of the biggest benefits of forecasting in the cloud, not in your beloved spreadsheets, is that one accurate forecast can drive multiple different scenarios and this can fuel daily decisions. Creating your forecast used to be hard work. Add to this that it would usually only get printed 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). Who would enjoy preparing that? It feels like a thankless task when it should be a practical, actionable business plan that helps you succeed.
Once you have your forecasts in place with FUTRLI, it takes seconds to visualise different scenarios. If you want to see what winning that coveted client would do to your annual profits, then it can be visualised in just a click or two.
Furthermore, you can run scenarios simultaneously and view them side by side, visualising any KPI you wish, helping you get a better grasp of your options and take the fear away from making the wrong decision.