Financial forecasting doesn’t need to be difficult or time consuming. In fact, it should be one of the regular CEO practices that you’re implementing in your business, and part of what I’ll be taking attendees through in my upcoming workshop.
I often hear people say that they can’t be bothered with a budget as it changes the second that they complete it.
Yes, things are constantly changing in our businesses, but that’s exactly the reason that we need to be on top of what’s happening. When we’re budgeting, forecasting and reviewing then we become informed, decisive and nimble, giving ourselves the absolute best chance to create profitable businesses.
Whilst a budget may take up some of your focused time to complete, forecasts don’t need to be a time-consuming activity. Once you’ve set up the template, it becomes a straightforward process. Here’s how I complete my forecast each month.
(If you haven’t set up a forecast before, check out this article or read this one on how to make it easy).
Update revenue
First, I look at my sales quantities, prices and trends in sales. There’s lots of different elements I could dive into, but I try and find the reasons behind sales in the past to either predict what’s going to happen in the future or to change my focus.
For example, if my starter package is selling well each month and I now have a waitlist, I could look at increasing my price to have a positive impact on revenue. Conversely, if it’s not selling well, I could forecast that my sales will remain the same in the future as I’ll be placing more effort into organically marketing that package.
Update expenses
Have you been notified of an increase in one of your regular expenses? Perhaps you know your insurance is increasing, or a contractor’s hourly rate is due to rise. Is there an associated increase in expense in line with a forecasted sales increase? For example, you’ve predicted sales will increase due to an increase in Facebook advertising.
Also think of it from the opposite perspective. If you’ve got an increase in an expense, will this increase your time or resources to then increase your sales? For example, if you outsource your content creation, this will be a forecasted expense, but now you’ll be able to focus more on sales as you have more time on your hands.
Check how you’re travelling
Now you have your year-to-date actual figures, combined with your new forecast, how does this compare to what you wanted to achieve this year? If you’re falling behind, what are three things you can focus on to get back on track? If you’re ahead of your goal, how can you capitalise on it? Could you reinvest any extra funds back into your business?
If this sounds all too difficult, then I’d love to help you. I am running a workshop taking you through the processes of budgeting, forecasting and reviewing on Thursday March 17th at 11am AWT/2pm AEDT/1pm AEST.
Also my Measure and Manage package will help keep you focused and on track. With regular financial insight through monthly analysis, reports and reviews, you’ll feel confident and empowered that you’re making the best decisions to create financial wealth and freedom. You can find out more about the Measure and Manage package here.