Reducing the uncertainty: financial forecasting and planning

Economic conditions and the costs of trading make it difficult to keep your finances on track. We’ve got five ways to reduce the financial uncertainty and improve your planning.

Uncertainty can be a major threat to your strategic financial planning.

Being unsure of what lies around the corner makes it difficult to make those important financial decisions around operational budgets, investment and growth funding.

By utilizing forecasting and scenario planning, you simplify financial management and alleviate some of the financial challenges and uncertainty.

Focusing on your financial future

Reviewing your cash flow statements, profit and loss reports, and quarterly management accounts provides insight into your business's past performance. However, these documents offer little information about your future financial direction and prospects.

By focusing on the future instead of the past, you can gain a clearer understanding of the upcoming landscape, encompassing future cash flow, revenue, profits, and operational budgets.

Five key techniques you can use to reduce your financial uncertainty

Cashflow forecasts

Cash is king, so having a detailed overview of your cashflow trajectory is vital.

Using cashflow forecasting apps such as Fathom allows you to anticipate your cash availability and identify possible cash shortages with enough time to address them. By reducing expenses or obtaining short-term funding, you can maintain a positive cashflow for your business. This forecasting and foresight enable you to continue operating despite market uncertainties.

Revenue forecasts

Understanding future trends in your sales and revenue data assists in maintaining a stable income.

Revenue forecasting apps, like Clari analyse your sales data, revenue trends and market shifts to anticipate fluctuations in your revenue. Armed with this future view of your potential revenue, you can adapt your pricing, invest in more marketing and make your income more consistent.

Scenario-planning

There’s always more than one potential outcome of any business situation. Having a plan B (or C, D and E) allows you to understand the multiple potential possibilities – and plan for them.

An app such as Modana assists in modeling potential 'what-if' scenarios, allowing you to visualize possible outcomes of an economic downturn or supply chain disruptions. This type of scenario planning facilitates the creation of contingency plans and helps mitigate potential risks.

Profit projections

Achieving profitability as a business is crucial for several reasons. It demonstrates to lenders that you are a low-risk borrower, enables you to reinvest in the business, and influences your dividend payments.

A tool like Teamwork helps you track your performance and estimate future profitability, factoring in variable costs, sales and market changes. This helps you determine your price point, drive cost-cutting measures or make investment decisions that keep the profits rolling in.

Budget forecasts

Tracking and forecasting your budget performance keeps your expenses in check.

Budgeting apps, such as Jirav, assist in creating flexible budgets and staying within them to meet your financial objectives. Budget forecasts allow you to monitor your progress, manage your expenses, and eliminate any unnecessary spending, ensuring you adhere to your planned budget.

Making your financial future clearer and easier to navigate

Given the fluctuations in economic conditions and the costs of raw materials and labor, taking financial forecasting seriously is essential.

Come and talk to us about the key areas of financial uncertainty in your business – and find out how we can guide you through these uncertain times and out the other side.

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