Owners of small to medium businesses will be well aware of the importance of good accounting, and the need to file prompt tax returns. However, one area that often gets overlooked is the need for financial forecasting. Forecasts are just as important to small companies as they are to big corporations. From securing loans and investment to business sales, having realistic and reliable forecasts is essential.
What is in a business forecast?
Though you may keep meticulous records for your accounts, forecasts require a different approach. Despite their many similarities, there are also some key differences between accounting and forecasting. Accounts deal with transactions already made, and cash already received, while forecasts are concerned with the future profits of the business. The accounts are used to create the forecast, along with a host of other information.
Financial forecast statements use more generalisations and summaries than accounts do. Four key pieces of information are used to create the forecast: projected sales volume; anticipated production schedules; expenses and costs; year on year profit. Though a forecast could be described as an educated guess, there is a lot of financial skill involved. The forecast needs to be realistic and reliable to gain any approval from lenders and investors.
Forecasts and balance sheets produced for you
As a virtual CFO service, we help small companies make the most of their finances and assets. This includes supporting you and your company while it grows. The best route to business expansion is through investment and borrowing, which allows you to increase production and sales. In order to get that funding, you need to prove your company has a viable future – and this is where your forecasts come in.
Whether you are trying to secure the support of angel investors, get your product into stores, or get a business loan from your bank, having detailed forecasts on hand is a must. These tell the lender everything they need to know about your company, including its future chance of success. Let Propeller Advisory take care of this information for you. Call now to speak to a member of the team about your needs.