Forecast your financial position for 2015Do you want to make 2015 count? Count towards generating more income for your business with more profit to extract, establishing or re-establishing your retirement plan and making the right investments to ensure this? If you answered “yes” to any of these (which I am sure you did) then a key exercise required to give you the best chance of success is financial forecasting. Download our simple Profit and Loss Forecast Template to get you started.
A common assumption is that financial forecasting is a “finger in the sky” exercise and holds little relevance to reality. This is wrong. Financial forecasting is a highly useful tool to give insight into what is yet to come.Whilst a forecast can never be 100% accurate as so many variables apply; ups and downs in the economy, unforeseen personal circumstances, staff issues, even the weather plays a part, financial forecasting means structured thought is given to the future.
Assessing trends from actual dataThe first stage of forecasting is to take past records and experiences and assess trends. These trends are largely based on actual data so can be considered accurate information. From this data it is possible to get a really good grasp on the financial life of a business, including peaks and troughs year on year and month on month. So whilst forecasting itself does involve some guesswork, the building blocks are based on actual facts and figures, if it is executed correctly, that is. Figurit assist many doctors and dentists with financial forecasting to ensure their predictions are realistic and all angles have been explored. Typically, the starting point will be the formal financial statements prepared for the past 12 months but depending on when the forecasting exercise is carried out the use of management information may be necessary. Management information should still be accurate just that it may not have had the professional eye of an accountant cast over the numbers yet.
1-year rolling forecastThe more into the future the forecast covers the more difficult it is to be accurate. So to have and maintain a 1-year rolling financial forecast is often the most practical solution for dental practice owners and medical professionals. By “rolling”, this requires constant assessment and the best practice is every 3 months. Review the original forecast against actual management figures for that financial quarter and then tweak the rest of the forecast according to the new findings of how the business is performing: First things first! Create the initial 1-year forecast using our simple to use Forecasting Template to have a tool to set targets and monitor business performance in 2015
- Understand if your business is on target to make the right level of profit
- Make better business decisions at the time they are required
- Continually plan ahead for future financial periods to enhance business development
Uncover opportunitiesFinancial forecasting also uncovers opportunities that perhaps had not been considered. Imagine you are looking through past data and can see that every August your sales drop drastically. This could be seen in a negative light but can also be turned into an opportunity. Maybe you could reduce staff in that month by encouraging holiday or unpaid leave. Alternatively, you could run a “can’t say no” promotion that encourages your patients to make an appointment. Why not try to turn that past trend around now the facts are clear?
Getting startedFigurit have prepared a simple Profit & Loss Forecast Template for you to get started. You will need:
- Financial figures to your last year end, for example 31st March 2014
- Management figures to the end of the current financial year, for example 31st March 2015 (or to date)
- Some time allocated where you will not be disturbed to focus on the task in hand
Business planning – next stepsFinancial planning makes up part of Business Planning If you are keen to continue with ensuring your business is a success in 2015, consider the following:
- Cash Flow Forecast
- SWOT analysis (assessment of your business’s Strengths, Weaknesses, Opportunities, Threats) – FREE DOWNLOAD AVAILABLE
- Marketing Strategy & Budget – NEXT MONTH ARTICLE