Using forecasting in your decision making

In your business, you want to know what the future holds. In order to make informed decisions about your future, you need to utilise your forecasting tools so you can project your future data. Running projections (forecasts) using your historical figures can help you have a clear idea of the road ahead – and that’s invaluable!

Run regular forecasts

Positive cash flow is vital to the short, medium, and long-term success of your business. Without cash, you simply can’t operate the business efficiently. Running regular cash flow forecasts helps you overcome this challenge. With detailed projections of your future cash flow, you can spot the cash gaps that lie further down the road and take action to fill these cash flow holes.

Income can often be unpredictable, especially in challenging economic times. If customers fail to pay an invoice, or suppliers increase their prices, this can all start to eat into your available cash. Using forecasting, you can extrapolate your numbers forward to which weeks, months or quarters are looking financially tight. And with enough prior warning, there’s plenty of time to look for short-term funding facilities, or to get proactive with reducing your spending.

Run sales and revenue forecasts

Keeping your business profitable, sales stable, and revenue predictable is important to generate enough capital to fund your growth plans. You need to know how those revenues will pan out over the course of the coming financial period.

Revenue forecasts work much like a cash flow forecast. Instead of looking at your future cash position, a revenue forecast gives a projection of your sales and how much revenue is likely to be brought into the business in future weeks and months. With better revenue information, you’ll be more on top of your profit targets. You can manage your working capital in a more practical way, and you can improve your ability to invest in new projects, additional staff, or funding of the long-term expansion of your business.

Run different scenario plans

What’s going to happen to your business in the future? None of us have a crystal ball to predict this future path, but by looking at different possible scenarios, you can run projections to see what the potential outcomes and impacts may be.

These ‘What-if’ scenarios can be exceptionally useful tools when thinking about big business decisions. What if there’s an economic recession? What if our sales increased by 25%? What if we raised our prices by 10% next quarter? What if we lost a quarter of our customers? By plugging the relevant data into your forecasting engine, you can run these scenarios and see how each option pans out. That’s extremely useful when the worst (or the best) happens.

Update your strategy, based on your forecasts

By making the most of your forecasting tools, you give your stakeholders the most insightful data and projections to work with.

A good business plan is designed to be flexible and evolve to meet the needs of the changing market – and the changing needs of your own business strategy. By making use of your cash flow forecasts, revenue projections, and what-if scenario planning, you give yourself the insights needed to update your strategy and your business plan. You can make solid, well-informed decisions and keep yourself one step ahead of your competitors. In the dog-eat-dog world of business, that’s a competitive edge that can make a huge difference.

Let us help you with your forecasting

We can help you delve deeper into forecasting and show you the latest features of forecasting software and apps. Working with us, together we can see the value that’s delivered through well-executed forecasting and longer-term projections.

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