Forecasting. Why you Should Try it.
What is Forecasting? Well Forecasting is figuring out what may happen in the future based on the performance in the past, what is happening now & what things may impact your business in the future. A lot of businesses do this right across all financial areas so they can understand the impact of changes in the future.
It’s based on existing facts and some estimating so the forecast may not line up exactly with reality but it will give you a better understanding of your business & make you think about what is to come & potentially what you need to have in place to achieve your goals.
“Forecasting enables you to make sure your business is ready for the good, the bad & the ugly.”
Starting it from scratch can be a bit of a nightmare & so we at Hunt & McTavish can provide you with a template that will make it easier to put a forecast together. Once you have done the first one its easier to continue to update it.
Here are some very good reasons to forecast:
You will get to know your business even more – The simple act of getting into all the variables of your business with help you understand the linkages, timing & where your business is doing well or losing money. Knowing all the information will enable you to take actions today because you understand the impact of those actions tomorrow.
It will make a world of difference for your customers – Some restaurants keep track of exactly what has been sold on a daily, weekly & monthly basis. Why? So they buy the right amount of stock or inventory based on the past. What happens if they didn’t? How much food would get wasted? Whether you’re in hospitality or another industry its important to keep your customers happy & have the right amount of stock in place (well at least most times!!). Good businesses have happy customers.
Turn your business into a well-oiled machine – Owner’s stress comes from not having enough cash, inventory, staff or ability to provide a great product or service to your customers. When you forecast you can be prepared for any shortages coming & reduce your stress! Sometimes plugging those gaps can take quite some time like finding, hiring & training new staff so it’s important to, as the boy scouts say, be prepared.
When you forecast you can be ready for big events Thinking about an end-of-financial-year sale or Christmas sale? What about less staff during school holidays? By forecasting you can think about Christmas in August perhaps with marketing campaigns or having extra stock & staff. With the increase in timing of the delivery of goods (particularly from overseas) for a lot of businesses, thinking about the future becomes even more important.
Dive into your range of products & know what works now – In many industries, one or two products/services often suck up a lot of time, energy & cash that could be spent on the products or services that are working best. By forecasting you can know what products/services are working well now & steer your business in the direction that avoids wasting time, energy & cash in the future.
Forecasting is critical when seeking finance or other support for your business – Banks or finance companies don’t approve finance based you sticking your finger in the air to guess the direction of your business. They want to see the future of your business & that its going to be profitable. You also need to continue to forecast when you have loans so you know if you will have any problems with your repayments. Businesses with a clear growth strategy are always going to be more likely to receive finance, investors or any support than those that do not.
Well, we are sure there are plenty of other reasons why forecasting is important for your business so maybe its time you thought about getting started if you haven’t already. We will try to make it as easy for you as we can. It will take you some time particularly the first time around but once you start its much easier to go through the exercise on a regular basis.
We can Assist You
The most important part of forecasting is that it gives you a great understanding of the financial aspects of your business. For some of our clients they like to meet with us on a regular basis to help them understand financial forecasts & the impacts on their business & maybe you should too.
Do you need to forecast? Talk to us today about how we can help you understand your financials so you are prepared for what lies ahead...
Give us a call today on (02) 6942 4932.