As a business owner, it’s increasingly difficult to ride out the changing economic conditions and manage the financial ups and downs of doing business in 2024.
According to recent data from the Australian Securities and Investments Commission (ASIC), 11,053 companies went into administration in the 2023-24 financial year.
Knowing what’s around the next corner would be incredibly helpful. This is where forecasting tools and financial projections can become a real game-changer.
Why your small business should embrace financial forecasting.
Good financial management starts with solid bookkeeping and accounting processes. But your accounts only tell you what’s happened in the PAST – not what will happen in the FUTURE.
Financial forecasting takes this historic accounting data and projects areas like cashflow, operating expenses and revenue forward in time. In essence, what you get is a projection of how your finances may look one month, six months or even a year down the line.
Why is this important?
Let’s take a look at just a few of the benefits of using accurate forecasting to manage the financial strategy and health of the business:
#1 Accurate predictions.
Your forecasting software can analyse your historical data and current trends to provide accurate predictions of future sales, expenses and cash flow. These forecasts allow you to accurately see how your finances will look in the future.
#2 Proactive financial management.
Armed with these forecasts, you can quickly see where there’s a need to boost revenue, manage cashflow or optimise your allocation of resources. In short, this information helps you assess and avoid the big finance pitfalls.
#3 Improved cashflow management.
Forecasting helps you spot any potential cashflow shortages or surpluses. This prior warning gives you time to take cost-cutting action to rebalance cash shortfalls or find useful ways to reinvest the surplus cash.
#4 Better allocation of resources.
With a deeper understanding of your future financial needs, you can allocate resources like equipment and staff more effectively. This helps to boost growth and expansion, while keeping your finances in a healthy position.
#5 Data-driven decision-making.
With a forecasting solution in your app stack, you have the data, forecasts and reporting needed to make truly informed decisions about your business’s financial future, and to review these decisions on a regular basis.
There’s a wide choice of financial forecasting apps out there, all of which can neatly integrate with your existing accounting software and business reporting systems.
Our team can run you through forecasting solutions that are a best fit for you, your business and your financial systems
The team at EMspire Advisory are trusted, qualified Chartered Accountants, tax agents, and small business accountants. We work closely with our clients to achieve the best possible outcomes. To find out more, please contact us!
Please note that this information is not specific and is general in nature and cannot be relied on as advice. Please contact us for advice specific to you and your circumstances.