Whilst no one can predict the future, financial and cash forecasts can help you to make informed decisions about your future operations, based on historical trends. For example, your business may have seasonal trends whereby sales are higher during certain months of the year and therefore you would look to avoid large outlays of cash during months which aren’t as cash generative.
Through effective forecasting you can not only determine future cashflows, but you can also use this data to help build your future business plan and manage the expectations of your senior management team. Well prepared forecasts can also help you to understand key business trends, such as what happens to your bottom line if your top line increases by 5%. For all businesses, ‘cash is king’ which is why it’s so important to ensure you have sufficient resources to meet your future financial obligations as they fall due.