Our last post discussed big-picture business goal forecasting. Today we’ll talk about financial forecasts for your business.
You should have monthly, reviewable, updatable financial forecasts to help you steer your business – sometimes the waters you have to navigate can get murky.
The quickest, easiest way to create a financial forecast involves projecting future revenues and expenses based on your business’ historic trends – so much projected increase for revenue, expenses, costs of goods sold, etc. That’s one reason a financial forecast often includes past actual results, though this forecasting method is perhaps more akin to budgeting, which is not the same as preparing a comprehensive financial forecast.
Because “quickest and easiest” is often not “best.” There are so many factors which contribute to your business’ financial health beyond simply tracking sales and expenses and projecting reasonably appropriate incremental increases.
Are you the verge of signing a huge new customer?
Are you contemplating a major capital expenditure?
Are any of your key team members planning to retire?
What are the emerging market trends in your industry?
If you are the hugely busy owner of a closely held business, you may be tempted to go the “quickest and easiest” route in financial forecasting, but the above points, which represent only a few of the many factors to be considered in a well-prepared financial forecast, indicate you might do better to hire an outside expert.
Further, you may well be acting as your own CFO – and that may not be the best fitting among the many hats you have to wear during your workday.
A virtual CFO can step into this role, take this hat out of your work wardrobe, and provide the expertise that will help you navigate your business toward even greater success.
S/he can ask the right questions, identify the variety of salient factors, the opportunities and potential pitfalls facing your business, analyze them, and prepare a financial forecast for your unique business that is comprehensive and mindful.
Your business’ financial forecast should be reviewed by both you and your virtual CFO together on a monthly basis and compared with the actual results (more on this will come in a later post). Your virtual CFO will then revise the forecasts for the coming months.
In this fashion, the forecast becomes an ever-more-accurate roadmap toward your short- and long-term business financial goals.
If your business would benefit from the services of a virtual CFO, we invite you to consult with us. We are at your service.
Please click here to let us know how we can help you.
Until next time,