We’re halfway through February, which means we’re at the midpoint of the first quarter of 2017.
Now, the question is: how is this quarter shaping up so far? If you haven’t looked at your numbers yet, the time has come.
With one full month of figures in the system, now is the time to take stock of how your proposed business budget is lining up with actual information. Are the numbers close? Have you overestimated (or underestimated) where you’d be at this point in the year? How do you compare to the same time last year?
Also, don’t look at only the past month, but to the future as well. How does the rest of the quarter look to be stacking up? Have new opportunities presented themselves which weren’t taken into consideration when the budget was created (often months ago)?
These seem like simple questions, but the accuracy of your budget depends on both realistic assumptions and figures. Unfortunately, many businesses take a ‘set it and forget it’ approach to their yearly figures.
This can lead to problems down the line, including missed projections, underperformance, and an appearance to investors of overall poor planning.
So what’s the solution? Well, one way to get a jump on the rest of your year is to use this time to start running financial forecasts for the coming months.
It’s Never Too Early to Forecast
In the past, one of the biggest hurdles businesses faced with forecasting was that it was clunky. The process of forecasting often took multiple departments, an ever-increasing number of Excel spreadsheets, and months to prepare. Because of that, forecasts became a great support tool, but not something many relied on heavily for decision-making.
In fact, even today many businesses are still using these older, more outdated methods. This is likely costing them not only time but also on the bottom line.
There still is good news, though!
With the advent of advanced technology, financial forecasting has moved to the forefront. Now, with the right tools, forecasts can update on a monthly, weekly or even daily basis.
It is becoming easier to pull together historical data, actual numbers and predictions. This allows for a much more complete snapshot of where a business is right now and can help make strategic decisions for the future.
This is just one of the reasons I’m such a big proponent of incorporating financial forecasting into every financial strategy now. Once those actual numbers start rolling it, you have a solid base to start forecasting for the future.
You don’t have to wait until the end of the first quarter to begin thinking about the rest of the year.
Accurate Financial Forecasts Improve Decision-Making
Another huge benefit of thinking about financial forecasting early in the year is that it gives you the potential to create a variety of forecasts based on different sets of data.
Forecasting today isn’t the forecasting of old: now data can be broken down even further, covering sales, cash flow, revenue and capacity -driven projections.
You can create forecasts tied to your pipeline or sales cycle. When you combine these numbers with past performance data, your company will have a much more realistic look at the overall picture.
When able to get much more granular on the details, decision makers can identify patterns, opportunities and where things might go wrong.
All of these are crucial factors when it comes time to make a call later in the year that could affect the bottom line. Consider running financial forecasts now to be an early warning system of sorts for potential risks and issues that could appear during the year. It’s in these situations that having timely and accurate forecasts matter.
No one can predict the future, but when you incorporate consistent forecasting into your financial strategy, chances are your business is going to be much better prepared for it.
If you want to learn more about how you can incorporate financial forecasting into your business strategy, join us for a webinar on Friday, February 17th. You’ll get an in-depth look at why forecasting is so valuable to CFOs and how you can use forecasting to improve your company’s growth. Click here to register.
Businesses of every description rely on the Budget Maestro™ family of software solutions by Centage Corporation to improve the efficiency and effectiveness of their business budgeting and planning, financial forecasting, financial consolidation and reporting processes. For more information, take a tour of Budget Maestro, contact Centage, or call 800-366-5111 now.
