Being on top of business financials and bookkeeping is important for any company to help ensure that things such as tax obligations are fulfilled, and the day-to-day operations can run smoothly. However, many businesses underestimate the potential benefits of using financial data to plan and forecast for the future, and how it can help accelerate growth and success when applied in the right way. Using this kind of process can also help businesses to better predict and navigate bumps in the road, with the information providing a good basis on which to base decisions and areas in which to focus. 

Financial planning and forecasting helps businesses to:

• Budget appropriately, by using known data and industry knowledge and experience to predict future peaks and troughs.
• Be accountable for performance, as the plan will incorporate benchmarks for success and expected progression towards larger goals and targets.
• Better evaluate risk, by creating contingency plans that can mitigate unforeseen circumstances or financial scenarios that are unlikely, but possible. While eliminating all risk isn’t possible, financial planning can help minimise the potential liabilities and speed up recovery. 
• Make more informed strategic decisions, using the backing of accurate financial data and a solid plan to move the business forward.
• Plan and implement sustainable growth, with the planning and forecasting helping to highlight opportunities and areas to grow and how to get the best return on spend within the business. 

The elements involved in effective financial planning and forecasting

Financial planning and forecasting is done by taking a range of different data and factors into account to develop a strategy that is backed by data, rather than speculation. This can be a significant help if the business is looking for investment or planning to borrow. Some of the most important elements that go into a financial plan are:

• Historical financial performance data – taking real-world facts and context into account is a foundation for the other aspects of the plan.
• Financial projections – looking at the next 12-24 months to predict revenue and opportunities for new business.
• Cash flow and expenses forecasts – using past data and predicted inflation rates, increases in costs of services or products/supplies/manufacturing/logistics etc to make the calculations.
• Best-case and worst-case plans – by exploring a variety of scenarios to ensure there is a plan in place for both positive and negative events potentially occurring e.g. location closures, natural disasters, global pandemics, better than expected performance etc.
• Analysing internal and external risks – by looking at financial figures relating to various possibilities such as market forces changing, key staff turnover, supply chain weaknesses etc. 

Here at PW, we offer assistance to businesses of any size with our financial planning and forecasting services, to help ensure that the company has all of the information needed to take them forward with confidence. Get in touch to find out more about how we can help.