Financial Forecasting

Preparing for the future is a daunting task. The success of any business may depend largely on the reliability of financial forecasting. By using financial forecasting a business owner can quantify goals and priorities and ensure consistency. Forecasting can also help you identify asset requirements and your needs for external financing.  Forecasting can play a key role in the budgeting process and can help you create flexible budgets that can adapt to changing business conditions. Our professionals provide financial projections and customized planning scenarios for management that include expert cash flow and budgeting analysis.

The financial forecasting process uses pro-forma statements.

The Financial Forecasting Process:

First: We help you collect the right information –both internal and external data, for example, sales and distribution data from accurate sources.

Second: We aggregate the information from all relevant sources, not just one or two.

Third: We analyze and synthesize the information.

Fourth: We report the forecast information to management and decision-making parties according to management’s requirements.

In order to prepare the pro forma income statement, we use the percent-of-sales method. The percent-of-sales method predicts sales by expressing the income statement objects as a ratio or percentage of the projected sales.

We prepare the pro forma balance sheet applying the judgmental approach, using management assumptions or percentage of sales data.

Our analysis is neither too simple nor too complex.  We build strong forecasts on more than trend analysis and sales pipelines, although these are useful tools.  Analyzing too many variables can lead to confusion and data overload.  Our balanced approach provides financial forecasts that aid in decision-making and can predict the impact of business actions and plans.

Short Term—Long Term Forecasting

Short Term Forecasts tend to be more reliable.  For example, we base a one-year forecast on actual known information provided by each department.

A long-term financial forecast assists in planning future building, equipment and personnel needs. We revise these long-term forecasts when the business owner has the actual information at hand. Then we forecast individual line items and bring the totals together in a meaningful report.

Some of the reports we provide can include:

Profit & Loss Statements

Balance Sheets

Cash Plans

Sales Projections

Expense Budgets

Ratio Analyses

Break Even Analyses

Sales by Category

Expenses by Category

Forecasting Cycles

The timing and frequency of financial forecasting varies from company to company, and by industry.  Some businesses prepare the first forecast in mid to late fall, to aid in the development of plans for the following fiscal year, while others submit a detailed current fiscal year-end forecast along with the next fiscal year's budget in March. Some submit updated forecast figures monthly to include the latest accurate information.

Will my business be profitable?

This is the primary question all business owners must answer for their stakeholders.  We help you build a comprehensive set of financial projections, complete with reports and charts, so that you can predict with greater accuracy whether your business will be profitable and when.