3 THINGS YOU SHOULD KNOW ABOUT PREPARING A FORECAST!

Ready or not, it is time to prepare your 2019 forecasts! While there are still a few weeks left until many of us will go on a well-deserved break, it is time to clean up the skeletons in the cupboard. 2018 has been a hard year for many businesses, and large numbers of high-street leaders are stepping down of their thrones.

Unfortunately, 2019 is not promising any miracles either, so it is time to sit down, reflect on the past year and strat preparing your forecasts. As many struggle to estimate how much money they will need for the following year, they are forced to close their doors prematurely. Thus, it is imperative to establish how much money your business will require and acquire appropriately. A solid cash flow forecast and a financial plan is a foundation for a good business future.

So, here are 3 things you should keep in mind when preparing a forecast:

BE REASONABLE

Many forecasts include numbers that are often pulled from a finger in a sky. If you do choose to include pie-in-the-sky numbers in your forecast, make sure that you are reasonable about them. Your sales team will not be thrilled about unrealistic targets and unachievable business goals, so make sure that you paint a picture that looks reasonable, not too bleak and not little.

Try sticking with forecasts that overview both conservative and aggressive revenues. By building two sets of revenue forecasts (conservative, aggressive), you’ll start to make conservative assumptions that you can relax a little for your aggressive forecast.

EVERYBODY’S PROBLEM

preparing

While financial forecasts and business strategy is often generated by the top-tier of the organisation, it’s necessary to get everyone involved in preparing a forecast. Not only will you end up with better numbers, but sharing the ownership of achieving company goals spreads the burden to everyone. People are more willing to be held accountable to numbers they understand and had a hand in producing. We wrote more about problems with KPI setting on our previous post.

IMPROVISE, ADAPT, OVERCOME.

Another secret tool to preparing a forecast that will keep your business afloat is to improve and increase cash flow forecast accuracy, to keep measuring, analysing, and adjusting. Only that way your business can truly overcome the realities of 2019.

A yearly budget or a forecast can become incredibly inaccurate in a couple of months, especially when you are thinking where your business is going to be in 12 months’ time. A rolling forecast can help tackle this problem by offering an in-depth look monthly into your key business drivers. From here you can link the events in the market to our business drivers and assess how your business will be impacted by it. By linking other line items to the key “drivers”, you can focus your forecasting efforts on material factors, such as orders or sales reps, and see the impact that changes to these line items have on the overall budget or forecast.

 

If you need help creating an accurate forecast, then try our forecasting software.

 

By |2018-11-28T15:55:34+00:00November 28th, 2018|Cash Flow Forecasting|0 Comments