6 Reasons why forecasting will change your life
Forecasting is basically determining what might happen in the future based on what’s happened in the past (and what’s happening right now!). Businesses can do this for a great many different areas such as cash flow and sales.
I know what you're thinking "Why plan for the unknown? Won't it always just be a guess?".
Yes, long-term forecasting will only ever be a guess – However, creating one will help you to think outside the box about the MANY things that could impact your business, and how you’ll build your business to the point it can withstand almost any of these potential changes.
Forecasting allows you to make sure your business is ready to be weathered and will withstand whatever happens next.
We know it can often be scary or overwhelming to tackle in the beginning with so much data to collect (and the end numbers resulting in a big sigh or gulp!). But here are 6 reasons to stick it through, because it really will change your life!
- It’s the closest we’re gonna get to predicting the future - Ongoing forecasting will allow your business to know exactly where it’s headed by analysing historical data and planning for anticipated events. Knowing that information will allow you to take actions today which will help you succeed tomorrow.
- It allows for a smoother journey for your customers - Having the numbers knowledge to identify an oncoming shortage of a key product or capacity will enable you to meet that demand and provide consistent positive customer journeys. This is very useful if increasing customer satisfaction and repeat purchases is a current strategy of yours.
- It can improve the entire operations of your business - Shortages in cash, products, staff or capacity directly impacts your operational functions. With the knowledge to anticipate and mitigate any upcoming shortages you can ensure your teams in sales, purchasing, production, marketing (and even HR!) will all run like a well oiled machine.
- Using historical data you can plan for an-y-thing! Think things like ensuring you have enough cash for Christmas closure and staff shortages over School Holidays all the way through to how your latest store sale or marketing campaign being launched on a specific day.
- You can see if things are about to go pear-shaped - Cash is king, don’t they say? Forecasting allows you to check-in at any time to see if a product is not selling as well, or another number has affected your cash position negatively. If you can see something going pear-shaped, you can jump in and play with the numbers to see what need to be done to get you back on track.
- It’s a great aid when seeking finance or to share with third parties - When applying for finance you need to prove that you business is profitable, and that it can remain that way. With regular forecasting, you can apply for finance armed with data to showcase it’s past performance, as well as a solid prediction of future sales and profitability. A business with a clear projection and growth strategy is always going to be more likely to receive finance, investors or any support than those that do not.
Rather than a short ‘shelf life’, forecasting allows you to make sure your business is ready to be weathered and will withstand whatever happens next. To grow sustainably, you need to have a really deep understanding of your figures. This can only happen if you’re constantly checking in with the ins and outs of your accounts, and forecasting for different eventualities. You’ll know when you’re due to be paid when you need to pay out to suppliers or similar, and can adjust if need be.
If you need any help with profit, cashflow and forecasting in your business, reach out to one of our top-notch advisors today to talk about how we can use your numbers for GROWTH (not just accounting).