How A Financial Forecast Can Drive Business Decisions & Lead to Success
Wouldn’t it be nice to have a crystal ball to forecast your company’s financial future? Indeed, a crystal ball would give owners of small to midsize businesses a big advantage when making business decisions and developing budgets. Whether you are an entrepreneur just starting a company or you operate an established business, a financial forecast can drive decision-making to contribute to long-term success.
2 Techniques for Financial Forecasting
Generally, the two main techniques for financial forecasting are quantitative and qualitative. Quantitative forecasting measures and manipulates historical financial data. Since a company’s recent financial trends indicate what’s to come in the near future, quantitative forecasting works well for short-term forecasting. However, start-ups don’t have historical financial data, so their forecasting likely involves qualitative techniques. Qualitative forecasting relies on human judgment and information that isn’t readily measurable.
Qualitative Forecasting: Staff Input & Market Research
When developing a qualitative forecast, first consider in-house expertise. Staff members can use their experience and in-depth knowledge to make financial predictions. Second, consider market research. Techniques like surveys, questionnaires, and focus groups can provide valuable data on which to base a financial forecast.
Quantitative Forecasting: Analyze Historical Data
Quantitative (or statistical) data uses past sales or performance data to project future trends. QuickBooks Online offers a cash flow planner that comes in handy, enabling business owners to forecast how money will move in and out of their company. (Learn how to use the cash flow planner.) QuickBooks Online also makes it easy to compare time periods side-by-side for quick comparisons of financial data in percentages or dollar amounts. When analyzing accounting records, what patterns emerge? What seasonal or cyclical components stand out? These can help produce a financial forecast. While past data indicates what will occur in the future, also consider other factors like the political, economic, and labor trends in the region. All of these elements - and many other unknowns - can affect a financial forecast.
Professional Forecasting and Advisory Services
Owners of small to midsize businesses often don’t have sophisticated expertise internally to develop a financial forecast for their organization. That’s where Prosperity Bookkeeping can help. Prosperity Bookkeeping offers forecasting and advisory services to steer business owners in the right direction. For example, our advisory and forecasting services can help clients decide whether to open a new branch office, expand a territory, or grow through acquisition. Read about the key features of Prosperity Bookkeeping’s Advisory and Forecasting Services.
Contact Prosperity Bookkeeping
While a crystal ball would be nice, let’s get practical. Prosperity Bookkeeping offers business-finance forecasting that starts with a clean set of books and an established set of controls to ensure that bookkeeping systems work properly. Next, Prosperity Bookkeeping analyzes key financial documents, including profit-and-loss statements and other hard data. Clients gain the insights they need to face complex financial challenges and make sound business decisions. Contact us today, and tell us your bookkeeping story.