Accounting Advice

What's A Forecast And Why Is It Important?

When business owners start experiencing growth, it’s important they have a plethora of tools and tricks at their disposal. At Accountfully, we help entrepreneurs and small business owners identify operational opportunities that support growth so they can focus on their product or service. Or as we like to say, ‘the stuff that got them to jump into business in the first place.’ One of the most important things we help our clients leverage is a forecast. Today we’re looking at what a forecast is—what a forecast isn’t—and how a forecast can positively impact the ways a business owner thinks about his or her business.

What Is A Forecast

For business owners, a forecast helps them plan ahead and make decisions on how to operate their business. Furthermore, it gives them a better understanding of what can actually be achieved. We like dreamers but we want dreams to be realistic and achievable. To create a forecast, Accountfully takes a handful of things into consideration.

Forecasting Sunny Skies Ahead

This includes things like industry norms, historical data points, and seasonal trends when applicable. Once this information is compiled, Accountfully shares it with the client so they can see the financial status of the company. This helps them understand the trajectory they are on for success and growth. The forecast is then maintained by Accountfully and reviewed regularly with the client so they are always aware of progress—for better or worse.

On the flip side, a forecast can be incredibly useless if not properly assembled or managed. We’ve met our fair share of startup founders who want overly complicated extended forecasts. This is not necessary for someone just getting started. Why? There are simply too many variables and not enough historic data to warrant something this complex.

How A Forecast Can Help

When it comes to owning a business, knowledge is power. For a product-based business owner or a food entrepreneur, we might create an 12 month sales forecast by SKU to understand expected revenues and design an inventory purchasing plan. This additional data can enable the client to forecast their cash flow for six to nine months and helps them plan in ways that they weren’t previously equipped to do. And while every business is different, we warn business owners from a once a year forecast mentality. We may need to update and review our clients’ forecasts monthly and/or quarterly. Why? It’s important to stay up to date and conduct regular audits of inflows and outflows to stay on track and see if there is internal shifting that needs to happen. And if as we report on actuals against the forecast, see that the actuals begin to shift away from the forecast and it doesn't look like you may hit near those numbers, it's probably time to create a new forecast to better manage your business.

Above all, it’s important that a forecast is managed by a team that can react quickly and can plan proactively. Accountfully has the technical capabilities and internal team support to help our clients with their forecasting needs. We’re keep numbers up to date and accurate in case new opportunities become available. Business owners never know when they’ll have a chance to get in front of an investor—we want to make sure they impress their potential partners and a forecast is a great way to do that.

Accountfully is an outsourced bookkeeping and accounting firm headquartered in Charleston, SC. With an additional office in Nashville, TN, we serve modern brands and businesses across the country. From pre funded startups to multi-million dollar companies, our clients are visionaries across all industries.

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