Do you already have an idea of how much your company is going to spend next year? Do you have a figure in mind for how many sales you think you could make over the next twelve months? These are important figures that your company needs to know so that you can plan various things around them. For instance, forecasting your future expenses and sales can help you create a cash-flow forecast which is essential if you want to improve your business’s finances and money management.
Even though forecasting various figures is necessary for any company, there are still some entrepreneurs and small business owners who struggle to do so. Usually, this is because they don’t have a financial or economic background behind them and struggle to cope with figures and predictions. But making essential forecasts doesn’t always have to be difficult for you and your company.
Here are some quick tips that will make your business forecasts a lot easier to apply.
Use Forecasting Tools
If you aren’t the best at juggling figures, you might be interested in using some of the various forecasting tools that are now available. There are now a lot of computer software and programs that can help you forecast sales, revenues, and cash flow. All you need to do is enter your data and these platforms will do the rest for you. They take all the mental work out of forecasting, as they will automatically create your forecasts for you. One further advantage of automating your forecasts is that they will be a lot quicker for you to create. So, you’ll be able to save time on them and focus your efforts and energy on more important tasks on your to-do list.
Work With Costs And Then Revenues
When you are creating a cash flow forecast, you will have two main sets of figures to work with: your costs and revenues. Some business owners start with the company’s revenues first, but that can often make things tricky. You’ll find that putting down the costs first makes things easier as you have control over these. After all, you and your company decide exactly how you spend your cash. This makes it quite easy to estimate what your total outgoings for the company will be. However, revenues can be a lot harder to estimate as you don’t have much control over them. That’s because they are affected by external factors that are beyond your control. If you struggle to come up with a reasonable figure for your estimated revenues, it might be worth talking to your accountant and asking them for advice.
Use Annual And Monthly Forecasts
Some companies simply set up annual forecasts for their sales and cash flow, but it will actually be more advantageous to create monthly ones as well. Even though this will take more time and create a bit more work for your company, you should find that these extra smaller forecasts are hugely beneficial. This is largely because forecasts can quickly become irrelevant if the figures that were used to create them turn out to not be realistic. So, if you do only set up one annual forecast to cover the whole year in December, you might find that it has become pointless by April because of miscalculations or poor predictions. At least if you create monthly forecasts as well, these will give you some closer insights into how your business is progressing as the year unfolds.
Keep The Sales Team Always Involved
When it comes to creating your sales forecasts, it is always necessary to involve your sales team as much as you possibly can. As these are the people who are constantly working with clients and customers they will have a good idea of how things are currently going. Not only that, though, but their efforts will also largely influence how well your sales do. So, make sure that all of the sales team receive regular training so that they can improve their pitching skills and try to bring in as many new customers and clients into the business as possible.
To Include VAT Or Not?
One of the main questions that many business owners have when it comes to their company forecasts is whether or not they should include VAT. This will depend on the status of your company – if you do include VAT in your prices already, then you should definitely include it in your forecasts. However, if you are not registered for VAT then don’t add it to your forecasts. However, if some of the businesses whose services or products you buy include VAT in the charge, then you need to include this cost in your expenses. That’s because you will have to pay their VAT even if you don’t charge it yourself.
Get To Know Your Customers
Make sure that you are carrying out plenty of market research to assess your target market. It’s also a good idea to collect data from your current customers if possible so that you can understand them as well as you possibly can. This will give you an idea of any possible trends that could affect how your customers use your company. Plus, it will inform you of whether or not they respond to any seasonal promotions or marketing. Hopefully, all of this information should give you an idea of whether your revenues will be higher at any specific points in the year. It’s important to know this as these periods could really affect your forecasts.
Don’t Forget The Small Stuff
One major mistake that many business owners forget when it comes to making their cash flow forecast is that they forget to include the small costs and expenses that their business incurs. For instance, they might forget a small expense like office supplies. But even though this cost may still be quite minimal, it’s necessary to include it in your forecast as it is still money coming out of your company.