Why Your Forecast Needs to Take Centre Stage in Your Business Planning
Posted on 20th February 2017 in Forecasting
Written by Amy Harris
When plotting the next key step of your world domination plans, your forecast should be at the heart of your decision-making. Without it, you’re running blind. In this blog, we look at why forecasting should never be viewed as the warm-up act, but instead take centre stage.
Why we’ve supercharged traditional forecasting
How many hours have you spent business planning? Whether you are brainstorming your next move at the gym or glued to your screen all night preparing for an investors deadline, we’ve all been there.
Making assumptions about what might happen next is not an easy task but it is a necessary one. However, the frustration my Co-Founder and I couldn’t understand (clearly, it was the pain we solved ourselves by developing FUTRLI), was how isolated all these ‘solutions’ to business planning and forecasting were.
Financial projections are expected as part of your business plan to paint the full picture, yet, conversely, an appendix would suffice. For us, our forecast is our business plan. The assumptions we make here will drive our immediate and long-term strategy.
In our opinion, it was backwards and inefficient to work in silos and, more importantly, opening our business up to unnecessary risk.
Let’s explore the top 3 benefits of a holistic approach…
1. Forecast first: your time investment will pay you back with interest
Business forecasting and planning is an investment in your business and, consequently, you must be prepared to invest the appropriate amount of time in this exercise. There are many ways to approach this whether you want to dive into your biggest income and expenses and tackle the detail or start by getting a high-level structure in place first.
The phrase ‘Work Smarter, Not Harder’ certainly isn’t new but never has it been more appropriate when it comes to starting your forecast. If you begin your forecast in a spreadsheet, you are making problems for yourself in the future. The sort of problems which keep you at work later in the evening and catching up on the weekends.
Spreadsheets are not only error-prone, you also have to worry about making sure you are backing it up regularly. The real mistake is what happens next…sales, bills, salaries. Your business won’t stop while you plan or forecast and it is these daily operations which will not be accounted for in your spreadsheet or Google doc.
If your forecast is online, in the cloud, you can access is anywhere and connect it to the financial heart of your business, your accounts package. FUTRLI integrates seamlessly with QuickBooks and Xero for example. When you’re catching your favourite band play, instead of copying data from your accounts package or spreadsheet into another spreadsheet, you’ll be thankful you read this. Please, trust me, we did it before in spreadsheets and it was a nightmare.
2. Get Some Clarity: Combine Your Actual and Future Insights
“Obstacles are those frightful things you see when you take your eyes off your goal”
– Henry Ford
What revenue have you forecast this month? What progress have you made towards your target, today? How is year-end profit looking, when actual and forecast data is combined? Is more funding next year required? Have you identified the successes that you and your team can build upon?
The reality is, if you don’t use forecast data in combination with actual data, you lose so much clarity for your decision making. And, if you try and stay up-to-date manually you’re stuck in an admin cycle which doesn’t allow you to work on meeting your objectives. An actionable business plan is your key business data presented beautifully on a Dashboard so you know where you are and where you are going.
3. There’s no ‘I’ in team: keeping everyone informed
It doesn’t matter what your best intentions are you cannot predict everything that will happen in your business. We’d argue that one of the most important parts of business planning and forecasting is the communication of your assumptions.
If you have a master spreadsheet which only you can access, it is hard to keep your team informed and on-target to hit their financial KPIs. Equally, if you’re seeking investment, you will be in a much stronger position if you can confidently visualise and articulate how they will be kept informed of the figures. Read five reasons why VCs won’t invest in your business, here.