Financial Forecast in your Business: Here are valuable tips

Working on a startup can be exciting, exhilarating, fulfilling and maybe even a little terrifying.

Creating financial forecasts and budgets are not typically how many entrepreneurs envision spending their time, but these tools are incredibly necessary.

An accurate and thoughtful forecast can be time-consuming, but it will help you to make informed decisions regarding staffing and growth, and it will help you attract investors.

Here are tips to create a practical and well-rounded financial forecast for your startup.

 

The value of a forecast

It can be tempting to put off creating projections and a forecast. You have a business to run, and it is completely possible the landscape may change in unexpected ways, and you know your business will need to adapt to those changes in real time.

Dedicating time to a forecast that could very well be obsolete in six months may seem like a waste of time, but it’s actually of extreme importance. As the saying goes, if you don’t aim at something you will always miss.

Creating financial forecasts takes practice, so even if the forecast ends up in the recycling bin, the knowledge and experience you gained will help you create a more dialled in forecast next time.

 

First, understand your finances

Putting together the information you need to create a forecast and a budget will help you realize where your money is going, so you can zero in on areas where you are overspending or losing money, as well as areas that are underfunded.

Objectively reviewing your finances is important, and this is a prerequisite to creating a forecast.

 

Show and tell

Investors will want nothing to do with your company if you don’t understand your business’s financial needs and goals. Your business numbers and KPI’s (key performance indicators) should be available at your fingertips. You can track your most important financials in Excel spreadsheets, but using a business dashboard tool that integrates with your accounting software can make it easier and help you avoid doing double data entry.

A forecast is a documentation that shows potential investors and lenders what they need to know about your business, but also that you are competent, knowledgeable about your business and its strengths and weaknesses, and a reasonably safe investment.

Without investment capital or business loans, your business may be unable to grow and reach the great things you know you and your team are capable of doing.

 

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