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10 Key Rules to Effectively Forecast for Success – Crystal Ball or Binoculars?
Do you know where you want your business to be in 6, 12 or 18 months ?
The answer is generally ‘maybe’, ‘yes’, or sometimes even ‘I’d love to know where I want to be in 6 weeks let alone 6 months!’
Deep down we all acknowledge that we should know where we are heading and that by ensuring that we take the time and effort to undertake this in a structured and logical manner this then gives us an advantage in achieving the business outcomes we desire and helping us avoid the outcomes that we do not desire.
We have found that a great number of our successful clients follow the following 10 key rules in order to effectively forecast for success :-
- Plan early …. plan before the new financial year starts – this ensures that you get the full year to put plans into action not ¾ of the year
- Get the most out of the process – consider using zero-based forecasting to question revenue, costs, margins and any assumptions – use it to challenge any preconceptions as to what is possible
- Understand your business KPI’s – what is critical to the business succeeding
- Where possible look to see that the forecasts are based on factual known information, recent past trends and assumptions and allow for any proposed changes that you may implement – use binoculars not a crystal ball
- Ensure that you factor in your own personal income needs and also factor in your tax payments fully – don’t let them come as a surprise!
- Don’t be afraid to undertake different scenario’s especially when in a growth phase. This can assist in showing how much additional work can you handle in a set period and what the impact on cash flow is likely to be in order to sustain that growth without running into problems
- Communicate your targets – don’t keep them to yourself – make them visible to all of your team especially the parts that the team can impact upon. You can easily limit what people see if certain areas are confidential
- Use the forecasts to understand what the bank see as key in the business and look to secure finance before it is needed when time is less critical
- Monitor your actual performance against your forecasts and take actions accordingly
As you can see the no. 1 is plan early. If you have not already created your forecasts for the next 12-24 months then consider undertaking this soon. You can access the required resources via our website for free if you wish to undertake this yourself.
Alternatively, MP+ provide a full forecasting service to a number of our clients that you may also find assist you in achieving the above.
We’re your goal focused partners and nothing brings us more satisfaction that assisting in you achieving success.
You may be thinking that we said there were 10 rules. There is! No.10 is the most important
10. Don’t talk about it, do it !
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