In any business, the budgeting process is important. Looking ahead and determining what needs to be done to keep expenses under control and the cash coming in is always crucial for any business. But, when it comes down to running your own business, things are different. The virtual nature of many small businesses according to Fintalent’s budgeting & forecasting consultants means we must look at a variety of forecasting methods. And while there are a few great tools out there that will help you forecast based on historical data or projected forecasts, sometimes that doesn’t fit with your company’s original methodologies or preferences.
If you are running a small business, here are four forecasting methods you can use to make sure your business stays on track.
Cash Flow Forecasting – This is the first and most important method of forecasting any company can use. Trying to look at factors like customer trends, supply chain issues and any other number of problems will mean nothing if your company is not staying on top of their cash flow. Cash flow forecasting will help you pinpoint exactly when the dollars will come in and how much they’ll bring in that month or quarter. Because this is so crucial for any business, it’s important to forecast both good and bad months, ensuring that your cash flow can handle the ebbs and flows of running a business. A good cash flow forecast will also help you know when you’ll need to raise money or go into debt, to fuel your business.
Market Growth Forecasting – Market growth forecasting is a popular method these days, because it’s something that helps not only your bottom line but also makes your business better able to meet customer demands. That’s why using market growth forecasts will also help you determine how much funding you’ll need in the future. Knowing this ahead of time can ensure that you don’t go into debt in order to keep up with the demand from a growing market. Getting this information beforehand can also help you determine long-term plans for expansion and hiring new staff members so that your company is ready for the demands of your customers.
Business Unit Forecasting – With many small businesses, there are multiple business units that can be tracked to see how your company is doing over time. For instance, you may want to look at both customer demand for your product as well as the cost of making and producing the actual product. This can be a great way to forecast your business strategy and determine if you should expand or contract based on the market trends. Business unit forecasting can also help you look at customer trends and determine if new products or services will meet with customer demand in order to help it grow even more over time. By breaking down each unit separately, you’ll see just how much potential each one has when it’s taken alone. You’ll also see how the two can work together to create an even more explosive revenue stream.
Industry Forecasting – Looking at what everyone in your industry is doing can be a good way to forecast your own business trends. And if you notice new products or services that many of them are offering, you might consider expanding into that area yourself if you think it will help bring in new customers. Industry forecasting will also show you whether any new technologies or regulations will affect your business. This way, you’ll be able to plan ahead and make any changes necessary before the regulation comes into force or the new technology becomes popular with customers.
