It can also show you that it’s time to hire more staff when you’re expecting an increase in demand for your products or services. Communicated through forward-looking financial statements, forecasts reflect how your business might look according to your estimates and assumptions about future revenue, expenses, and changes in your business.Īccountants and financiers share common ground in financial forecasting because it relies on the analysis of historical financial statements yet necessitates the input of future expectations.Īs a small business owner, you need a plan for what’s next: Financial forecasts can alert you to gird your financial resources when you see sales shortfalls or the payment of a massive debt on the horizon. Overview: What is financial forecasting?īusinesses create financial forecasts to play out a predicted future. A financial forecast is one of the best ways to express your vision. Lenders, investors, employees, and you all want to know what’s coming down the pike. It’s a question you’re continually asked as a business owner. The question that provokes the ire of every fresh high school and college graduate: “What’s next?” Follow these eight steps to creating a financial forecast. Businesses use financial forecasts to study the effect of potential decisions.
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