Forecasting, as we’ve heard it, sounds like something our local weather person is always doing, right? Well, while there may be stormy times that can cause a need to take higher ground, this is a great deal different. With Financial Forecasting, you are predicting your business’s future performance. With financial prognosis you try to predict how the business will look financially in the future. And, key performance indicators (KPI’s) are the aspects of the equation which arrive at what the answers provide.
So, how does one begin such a process?
That’s a great question. Every organization has Sales Figures that can ultimately determine the pulse of pipelines. When you look ahead and see what your pipeline has in it, you are able to support making good decisions towards company objectives. This combined with other financial forecasting aspects like revenue streams from other resources, future fixed and variable costs, and capital – the picture starts to become very clear.
Even Historical Data has a lot to say about what the financial forecast looks like in the immediate and long term future status of a company. This allows for making wise decisions on where to spend funds, how to spread them out, and what the expenditures for a certain period will be.
Investors use Financial Forecasting to determine if certain events will affect a company’s shares. Other analysts might use prognoses to extrapolate how trends like the GNP or unemployment will change in the coming year. The further ahead in time, the less accurate the forecast will be.
What makes Financial Forecasting important?
It’s a tool for entrepreneurs and CEOs to make better business decisions in a multitude of scenarios. It also helps with:
- Convincing investors to finance a company
- Setting objectives and budgets
We know it’s tempting to look in the rearview mirror when running a company. It is, afterall, what you know since it’s already happened. But, what it won’t provide you are answers to questions, like:
- How will the future financial situation of my company look?
- How much money can we pay out to shareholders this year?
- How much money can we generate this year to repay debts?
- How can we achieve our financial objectives?
There are so many questions that need to be answered when financially forecasting your company’s future. As you approach this process of forecasting for 2021, if you are perplexed by all there is to consider, we’d love to assist you. We have solid, fundamental steps to take that provide total transparency of all layers in your business and know how to take that information and turn it into a solid and simple plan.
Contact Junction Peak today to get started. We meet you right where you are and create the possible where your impossible resides.