“Our biggest business issue was the ups and downs of cash flow. Leenane Templeton helped us to forecast our business and cash flow so that we know how much money we need for the lean months. This pro-active planning allowed for a better understanding of the business and kept the bank manager happy.” – Malcolm
Better forecasting is better business
The Crystal Ball of Business Success
Business performance is affected by a myriad of factors for example fluctuating market conditions. But did you know that regardless of all the factors, it is possible to gain a good prediction on how your business will perform within a given period of time?
Forecasting for your business allows you to do exactly that. If you wish to be successful in business then you must have a business forecasting tool. By looking into the future of your business, you are well positioned to properly manage any factors that affect your business. In a nutshell, business forecasting challenges the management to give purpose to planning by focusing their energy into the future of the business.
Although it is not easy, forecasting is important for any business that is geared towards success. You should also note that this is a process that takes time to master and will definitely undergo various transformations before it can be effective.
Our team of business advisors at Leenane Templeton are happy to help with your business forecasting.
Below are a few guiding steps to help you kick off:
Set a time horizon that is realistic
Looking into the future can be overwhelming. While every business has it’s laid out day to day operational plans, it is important to look into a reasonable future. Businesses that operate under volatile conditions such as retail clothing may work well with a forecast that looks into a single selling season. On the other hand, the more established enterprises with cyclical like seasons can have a forecast of the next three to five years. It is extremely important that you understand your business.
Collect as much information that you will need for the future expectations
Forecasting can be easily confused with budgeting. To avoid this, it is very important that you able to distinguish the two. While a budget is very detailed and is often, at times, presented by the accounts department, forecasting is less detailed and focuses on the entire business as opposed to only the financial aspect as in the case of a budget. Furthermore, it entails a lot of uncertainty as it hopes to get a glimpse into the unknown future.
Forecast should be based on events, not time
Traditionally, most forecasts have been tied to the monthly activities where the results of the previous month are used to determine the next whilst considering external and internal factors. For it to be successful, a forecast should also be updated upon the occurrence of a significant event.
Prepare forecasts for multiple situations
Forecasting provides predictions based on what is likely to occur. Since no one can perfectly predict the future, the forecast should consider many possible outcomes. Business forecasting will help the business to have a quick and correct reaction to whatever occurrence.
It is no doubt that forecasting is an important part of the planning process. Unfortunately, it is treated as a financial process most times hence losing its purpose. If correctly used, it is a key tool that enables the business to anticipate its future and plan well for success.