financial forecasts quick overview | learn financial forecasts basics #Finance

have you ever tried to guess what will happen tomorrow or next week or next year in your business if you can count on one thing in business it’s that nothing will stay the same for very long in business today change is a constant therefore Savvy business people trying to anticipate

forecast and predict change before it occurs and because Financial con considerations can mean the difference between life and death to a company Financial Forecasts and projections are keystones of proactive business management practice ask questions similar to the following if

you want to prepare accurate Financial Forecasts for your business how many employees will we have on board this year and will we have the money to pay them when we need to will we have sufficient funds to invest in new manufacturing equipment that will improve the productivity of

our workers while increasing output and lowering rechecks how much money will we need to stock up our inventory in time for the holiday season will the money be available when we need it by what amount can we expect Revenues and Profit to grow or heaven forbid

shrink over the next year what is the timing of payments from our major customers and how will they affect our Cash Flow these questions and others like them should constantly be on the minds of financial managers Chief Financial officers CFOs controllers presidents vice presidents

and others who are responsible for ensuring that a business meets all its Financial Obligations for this reason managers conduct regular Financial Planning and Forecasting sessions there are two key kinds of Financial Forecasts and projections

shortterm and long-term in addition many businesses regularly produce cash forecasts to keep close tabs on the cash going in and out of the company in the sections that follow we cover all three shortterm Financial Forecasts if a Financial Forecast is for a period

of one year or less it’s considered a short-term forecast many firms use a variety of short-term Financial Forecasts and proforma informal Financial Statements to manage day-to-day operations these types of forecasts and Financial Statements

include cash sales or Revenue Profit and loss Income statement Balance Sheet receivables each of these short-term forecasts and others that an organization May select is important to the people in charge of monitoring a

company’s near-term financial position long-term Financial Forecasts if you need to plan for a period that extends more than a year into the future long-term Financial Forecasts are just what the doctor ordered but given how fast the business environment is

changing why would you want to make plans for more than a year into the future won’t things change at least 5 or 10 times before then of course they will but part of Financial Planning is planning for change remember Done Right long-term plans can provide your business with a

definite competitive Advantage how by giving your business focus and Direction business owners typically have a vision for where they want their companies to be in say 10 years so it makes sense to think about the financial Milestones you should cross along the way in short long range plans require

long term Financial Forecast to support them although they can never be as accurate as short-term forecasts they’re often better than nothing just as with short-term Financial Forecasts you can forecast all kinds of financial data well into the future here

are some of the most popular kinds of financial data subject to a long-term look cash sales or Revenue Profit and loss Income statement Assets Liabilities and Net Worth Balance

Sheet although long range Forecasting can help you support your long range plans the further out you forecast the more likely your figures will be inaccurate that’s why it’s important to base your forecasts on sound numbers and an understanding of business

Trends long-term Financial Forecasts are comprised of much the same information as short-term forecasts just with much longer Horizons these longer Horizons require careful attention to long range Trends in #1a73e8; text-decoration: none;">Markets and technology and they assume the possibility of Greater swings here are some tips for putting together accurate long-term Financial Forecasts look for long-term trends in Revenues and expenses are your

Revenues and expenses gradually trending up or down over a period of 5 years or longer chart these Trends as graphs and make an educated guess as to where the trends will lead in the future determine whether there are any business Cycles a business cycle is a periodic variation in

the economic activity of your business resulting from such things as consumer demand which may rise in anticipation of the holidays and decline immediately thereafter many businesses and none;">Markets go through regular business Cycles by looking at the big picture you should be able to pick out the cycles and Factor them into your long-term Financial Forecasts figure out what kinds of random events are most likely to disturb the long-term trends in

Revenues and expenses what would happen if your company bought out a key competitor how would that affect Revenues and expenses what if a competitor develops a new process that cuts its cost of production in half random events are just that at random by Nature

they’re hard to predict but the more you factor them into your long-term Financial Forecasts the more accurate your forecast will be cash forecasts by far the most important forecast for most companies is the cash forecast as you can see this type of forecast shows up in both

short and long-term predictions in business cash makes the world go around especially for young startup companies cash or the lack thereof can mean the difference between success and failure the frequency of reporting depends on the needs of the business and the importance of keeping close tabs on

its cash position for some companies regular means daily or weekly for others it means monthly quarterly or even longer using similar cash forecasts companies can determine when they’ll be taking in more money than they pay out to meet their obligations they can use this knowledge to guide

many decisions such as when and how much to pay vendors what levels of inventory can they comfortably keep in stock timing Investments in Capital Equipment for