Categories: Money

Business Decisions – Perform a Detailed Financial Forecast (Infographic)

One of the best tools a business can utilize to know where it currently stands and where it needs to go to achieve its financial objectives and goals is the financial forecast.

What is a Financial Forecast?

For the uninitiated, a financial forecast is a fiscal management tool that presents a systematic projection of expected actions your finance operation should take. Basically, creating a financial forecast is like plotting the route you need to take to arrive at your destination.

Planning for sales declines should be taken into consideration. For example, your business may experience a decrease in sales in the rainy season, and solutions should be made to overcome these obstacles e.g. start a more rigorous marketing campaign before the rainy season starts, or offset the season’s/quarter’s sales target to next season/quarter.

To perform projections and forecasts, various financial statements should be accessed – including past records, cash flow, fund-flow behavior, the applications of financial ratios, etc. together with considering the economic condition of the industry in which the business operates.

While the financial forecast is just a smaller aspect of a larger planning process within an organization, it has an immense impact on the overall decision-making process. Such advantages of financial forecasting are:

  • Validates the financial viability of a new business venture i.e. allowing you to create a model that proves how the business might gain significantly if certain strategies, actions, and plans are performed.
  • Allows a business to measure its actual financial operation against the forecast financial plan, and adjust where necessary.
  • Provides better control over the business cash flow.
  • Provides a benchmark by which future performance can be measured.
  • Spot any potential financial risk and shortfalls to avoid financial trouble.
  • Helps explain the requirement of additional funds for the business.
  • Helps prove a business’s capacity to repay a loan to its investors, suppliers, and banks.

Now that you understand how financial forecasting can help you make a better decision for your business, it’s time to familiarize yourself with its fundamentals. Financial forecasting includes the preparation of the following:

About Author:

Joseph F. Fragnoli is a Certified Public Accountant licensed in both Tennessee and California. Joseph has a passion for helping entrepreneurs build the business of their dreams and helping businesses and individuals strategically plan to minimize their respective income taxes and keep as much of their hard-earned money as is legally possible. His strong belief is that money in the hands of hard-working people is far better utilized than money in the hands of the government.

Recent Posts

Affordable Cremation Services Near Me: Tips and Resources

Losing someone close to oneself is unbearably hard, and making arrangements can also seem very…

5 hours ago

Electric Transfer Switch: A Silent Guardian for Reliable Power

The importance of an electric transfer switch is frequently underestimated in the overall operation of…

9 hours ago

Streamlining Payroll Management Across Borders

Key Takeaways: 1. Efficient payroll management across borders is crucial for global business operations. 2.…

10 hours ago

Business Storage Solutions: How Self-Storage Can Help Your Growing Business

As businesses grow, the need for additional space often becomes a pressing issue. Finding enough…

11 hours ago

How to Boost Engagement for Prop Trading Firms Using Lynx Prop Trading Platform

Do you need help to increase your prop trading firm participation and prospect-attracting process? Organizing…

1 day ago

Top Business Ideas for Entrepreneurs

Starting a business is an exciting venture filled with opportunities and challenges. As the landscape…

1 day ago