We often say in business that nobody knows what tomorrow will hold. There are scores of investors who would love to throw money at anyone who can tell them otherwise.
Changes happen every day. Customer trends drift effortlessly between products and gimmicks. Someone discovers a new manufacturing technique and a whole new industry is created overnight. Sometimes, it’s just as simple as a product falling out of fashion.
Yet, every single department, in every single company, in every single industry will try and predict exactly what the next year will hold. It’s just what we all do.
This has never been more necessary than in the financial sectors. Creating a good and useable forecast is one of the essential drivers for creating the right environments to make the most out of any opportunity.
A financial forecast is how the company can assess the financial future for every aspect of their organisation.
It will dive deep into every department’s budget, assess their payroll, their bonus structure, their spending and where they should be focusing that resource. It will look at the capital budget and assess the current fixed assets, the proposed purchases, and the proposed sales. Both the department and capital budgets will help to build the bigger picture for the financial team and their forecast.
The same process will take place in every limited company and every umbrella solution. If you are unsure of how you would carry out your financial forecast, you can always get an advice from a specialist accountancy services to start you off on the right foot.
Whilst it is easy to think of the financial forecast as purely a financial tool, it’s merits go far beyond the walls of any financial office and much further than the accountants’ desks. The information they contain will shape the decisions from the highs of the Boardroom all the way down to the receptionist.
A couple of numbers on a piece of paper will invariably decide whether or not a company is in the position to buy a new warehouse. Equally, it will also trickle down to the individual departments and whether or not they are able to hire any new starters.
The power of an accurate and reliable financial forecast relies not only upon the correct information and data being passed through it, but also on the timeliness of that information. It should be a dynamic document that is continuously revised.
Basing decisions on the information in a two-year-old document could lead to disastrous consequences. That dictates that the financial forecast is kept up to date. It should be revisited and improved at least every quarter and more often if any major events take place.
Creating a reliable and trusted financial forecast could be the most impactful task any company has carried out. The effects are truly felt companywide and the benefits of being able to rely upon unpon the data will always lead to a positive outcome.