Most entrepreneurs and business owners, and some private company investors, wait until they see profitability or cash flow problems in their financial statements before they finally conclude that they need to make changes in the business to improve results.
But most of those profitability and cash flow challenges can be seen in advance… far enough in advance for you to do something about them.
Helping you change, shape, and influence the future.
Here is how I define a reliable financial forecast:
Reliable – Unbiased, reality-based expectation of financial results that is designed for decision-making (not precision).
Financial Forecast - A full set of forward-looking financial statements (P&L, balance sheet, and cash flow) that includes a 2-minute summary.
Unbiased is the Secret
One of the most important words in that definition is “unbiased”.
By unbiased I mean the forecast is what you expect financial results to be without regard to the plan, targets, budgets, quotas, or what your Board or investors want to hear.
That’s why asking your sales force to provide estimates of sales so you can forecast revenues doesn’t work.
A sales person’s job depends on being optimistic and positive about the future and what they hope to sell in the coming months. They are biased, not unbiased (which is not a bad thing – it just has no place in the process of creating a reliable financial forecast).
That’s one of the big reasons I teach business owners, CFOs, and advisors in my book that a reliable financial forecast should only take one person to create and maintain.
Your Early Warning System
There is no need to wait and see poor financial results in your historical financial statements before realizing that you need to make changes in your business.
A reliable financial forecast provides the view through the financial windshield of your business.
It will help you “see around the corner” so you can make better business decisions.
NOTE: My Financial Forecasting book is available at Amazon.
A Quick Start Guide to Financial Forecasting: Discover the Secret to Driving Growth, Profitability, and Cash Flow Higher provides a straightforward, easy-to-understand guide to one of the most powerful financial tools in business: a reliable financial forecast. It will transform the financial future of your company and help you make better, faster, smarter business decisions. Order the book at Amazon. Or learn more here.