As we have discussed, entrepreneurs wear many hats and are very busy. One result is that sometimes entrepreneurs don’t take the time to prepare a financial forecast for their business.
Entrepreneurs may think this isn’t necessary – after all, they will see actual operational results in the monthly financial statements.
At RFG, we believe every business owner should have a financial forecast of revenues and expenses, by month, for the next twelve to thirty-six months. Without a clear target, what are you aiming at? How will you hold yourself accountable?
Your virtual CFO is an expert at financial forecasting and will help you prepare an informed monthly forecast for your business. S/he will review your actual results as compared to the financial forecast with you, so that, together, you can determine what may need adjusting – where you have over- or under-estimated revenues and/or expenses – and, most importantly, why the variance exists.
Have you gained a lucrative new customer, who provides revenues not taken into account when the forecast was created? Your vCFO will factor that into your projections, based on the specific customer’s needs (e.g., seasonal revenues versus a year-round boost).
Are your expenses higher in comparison to revenues than you believed they would be? If so, did you need to make unexpected repairs or other investments? Did you hire a highly-qualified team member whose expertise will take time to pay off for you?
As you can see, it is important not merely to see where your projections were not in line with your results, but why. This is where a vCFO can prove invaluable – determining the reasons for the variance, and whether more than the numbers may need adjustment.
Because the numbers will need adjustment. Everything in the business world (and the world in general) is fluid. Change happens and must be taken into account. Like any forecast (think weather), your financial outlook requires regular review and regular updating in light of new information and emerging events. Your vCFO will review your forecast with you, and together we can make the changes that will provide an increasingly accurate roadmap for your business’ journey.
Don’t bury your head in the sand – know your business, intimately and minutely, as it is. Knowing the details of your business is a vital part of that, and a financial forecast is an excellent place to start.
This process can help you ensure that your business stays on course toward your specific goals. Your vCFO is your trusted business advisor – someone who cares about you and the health and viability of your business. Think of his/her expertise as being like a doctor’s – but for the health of your business.
And it is all done with you – we cannot overstate that working with a vCFO is a collaborative process. We work together – RFG and you – to ensure you have a clear roadmap, and that it is updated regularly in light of new information.
As an entrepreneur, have you found that your actual results are sometimes not quite as you had hoped, or that they were better than you expected, but you are not exactly sure why?
Please click here to email me directly – I love hearing about your experiences and your questions.
Until next Wednesday –
PS – Next week – join us for a discussion how a virtual CFO can help you design a dashboard for your business