The Forecast is Good – A How To of Financial Forecasts in Business
Accountants in Manchester – Financial Forecasting
Financial forecasts in business come in all shapes and sizes and each is as important as the next. Financial forecasts are the things that allow you to plan against potential crises such as cash flow problems and so it is important to make them a staple of your regular business planning.
There will also be times during the life of your business when you will be required to provide financial forecasts requested by others, especially if you are looking to finance something such as an expansion or merger, everyone from lenders to potential partners may ask for a particular forecast and the quality of what your prepare for them may determine whether or not you achieve your desired outcome.
It is however surprisingly easy to get things wrong in financial forecast preparation and understanding just what to include is something that many business owners have learnt the hard way. There are one or two simple rules to remember that should help you produce the most effective, professional financial forecasts.
The first rule of forecasting, particularly when the forecast is at the request of a third party is to be very thorough; ensure that you have remembered to include all expenses and all income, don’t forget expenses that occur annually, monthly and/or are just occasional; leaving something out may look like deception and could be awkward for you to explain.
However positive your view of your business, it would be wise to remove the rose-tinted specs before sitting down to prepare a financial forecast; kidding yourself about how much money you will be bringing in or cleaning up the expenses a little is not helpful to anyone; if you are at all unsure about the accuracy of the picture you are paining, run it past a colleague or partner first, they should be able to provide a more objective opinion.
When putting together a forecast for professional reasons, for the benefit of other business people ensure that it is clear and concise and makes sense. How you present your financial information will say almost as much about your business as the information itself, so keep it as professional as possible; make no mistake you will be judged by such things.
Probably the most important thing to remember when preparing a financial forecast, whether for your own planning or at the request of your bank, is to research the information; strange as this may sound, it being a forecast relating to your own business, far too many business owners try to ‘wing it’ when it comes to forecasting and this is never good enough. You should approach the research in exactly the same way as you would any other part of your business planning; as with things like ‘competitor research’, gather all of the information together from all of the relevant sources before you compile it; taking this more dispassionate approach will give you a less biased, more accurate forecast, and whether for yourself or for someone else, the more accurate your forecast the more useful it will prove to be.
