Business budget forecasting is an ongoing management process that allows a business to plan accurately for its fiscal year with its past in mind. A business capable of forecasting future expenses and establishing more precise and realistic budgets has a higher chance of attaining ongoing profitability. This is done for cash flows, expenses as well as sales. However, everyday distractions push the forecasting process down the business’ priority list, which ultimately leads to low earnings. Here are a few simple steps for making a good business budget forecast.
1. Do not ignore forecasting
It’s quite easy to put off budget forecasting as it may look like a difficult task. However, it’s wise to know what comes in and what goes out; otherwise, a lack of this information is a recipe for disaster. For example, without a budget forecast, a business may fail to know when money will come in to pay its creditors.
2. Set clear goals
Without any clear goals, it’s difficult to predict your business’ financial future. Avoid guessing but instead, thoroughly understand what you want to achieve. Forecasting is affected when you lack clear organisational goals.
3. Involve the entire team
Budget and forecasting should be a team effort. This might also include people in various departments other than the finance department. Having everyone on board helps you have multiple perspectives on where the business is at and therefore help you make informed decisions.
4. KYC
A business should be able to perform a ‘Know Your Customer’ before creating any forecasts. Creating an excellent cash forecast needs you to know both the company and your customers well. Only after having information such as discounts, payment terms, payment period and other customer-related information can a business be able to forecast accurately.
5. Use the right software
Don’t rely on Excel or other spreadsheet software to do your forecasts. You would have avoided the risk of human error when using excel and spreadsheet software. Instead, go for cloud-based systems which have become a standard for finance departments. Software such as Xero allows more flexibility, accurate predictions and minimal errors.
Using planning software allows for more flexibility, cost savings and better security than manual options. Propeller Advisory can help you streamline your budget and forecast process with the help of Xero. Get in touch today to get this powerful solution and accurately collect actionable data for better decision making.
