Budgeting & Financial Forecasting
As a leading provider of professional, efficient and flexible accounting, our services extend to more than just bookkeeping and returns submissions. Advising on various aspects of business growth is another service we provide to the businesses and sole traders that we work with, and budgeting and financial forecasting are integral parts of the formula.
Budgeting and financial forecasting are two very essential tasks in business, providing the basis for the actionable steps companies and self-employed individuals need to take in order to boost growth and that all-important bottom line. Budgeting and forecasting can also be used to reveal market and customer trends, detect potential challenges sooner rather than later, and help everyone involved in your company stay on track to meet long and short term objectives. In this blog post, we take a closer look at budgets and financial forecasts so you can progress with a clear and accurate plan of action.
What do forecasts involve?
There are many factors that are considered when devising financial forecasts. Whilst predicting where your business finances will be months or even years from now is difficult, it’s important to note that forecasts can be adjusted accordingly. Your financial forecast will include:
• Start-up costs – this is applicable to new and existing businesses
• Sales – calculated either via the unit sales – number of units sold x price per unit – or margin sales – (total cost of stock x mark up ÷ 100) + total cost of stock – method
• Expenses – this could include your rent, insurances, company cars, advertising and marketing budget, wages, and accounting and legal costs
• Cost of goods sold – applicable if you sell products, you must take into account how much it also costs you to manufacture and store them
• Cash flow – how much money is expected to enter and leave your business through receipts and payments.
By calculating each of the above, you can devise a financial forecast that is as precise as it can be, using regular forecasting to monitor progress and adjust your forecast in accordance with the latest figures and trend developments.
How often should I forecast?
The frequency of forecasting really does depend on your individual business and its associated target market. Conducting and adjusting forecasts on a monthly or quarterly basis is recommended, however weekly forecasts may provide the accuracy some business owners need. Weekly forecasts are also recommended when you first start your business, during periods of rapid business growth or in the midst of financial difficulties.
Where can I get help with forecasting?
There are a number of tools that you can utilise to calculate each of these financial forecast factors, whilst enlisting professional assistance from an accountant like us is also recommended. Contact our accountants today for further support and information.