I managed to lock myself out of my house last week – one minute in the warm, next in the rain! We never know what’s coming next, do we?
Even though we have uncertainty, we still have to carry on. Forecasting is the essence of success! In business, we need to forecast even when there is no certainty of income – something that I am sure most of you will have some experience of in the last few months.
Hi, I’m Anna Goodwin – Author of five books, Director, Mentor and Trainer for Anna Goodwin Accountancy.
Basically, I take the stress out of finances – both business and personal. From running my own business and helping others to run theirs, I know how important forecasting is and how critical it is to keep an eye on your expected income.
So how do you start forecasting?
Ask For Help
This is how I managed to get into my house! In this instance, it was my long-suffering partner Neil who came to my rescue and the neighbours! If you don’t have any idea what your forecasts could be, ask someone who does. Who do you have either within your team or in the business who you can ask? One of my clients has taken on a sales rep so he would be a great starting point to ask about expected sales.
Use Last Year’s Figures When Forecasting
… But only as a guide. Don’t rely on these without taking into account any likely changes. For example, how will lockdown have affected this year’s figures and possibly next? The more you do it, the more you will have to look at in future years to check how your forecasts compared with the actual. You will probably notice that you get better year on year.
Existing Client List
Review your list. What are you expecting them to buy over the next year? Has there been a pattern to when they buy from you? Who is unlikely to be a client in the next 12 months? Review your orders – when are they likely to happen? When will they pay?
Holidays And National Events
How are these going to affect your sales? The first time I trained Krispy Kreme managers I was surprised when they said that their busiest time is Halloween. What about your business? What is your demand likely to be during these times? Don’t just think of the big events such as Christmas and Valentine’s Day, also consider national days relevant to your business – National Bubble Wrap Appreciation Day anyone? – and seasonal changes.
Is your income going to be affected by your competitor’s actions? What are their plans? Is a new supermarket going to be built near you? If so, how will this affect your income and what can you do about it? Have you seen one of your competitors move towards more online provision? Depending on your type of business, you may have to think internationally, not just locally.
Don’t give up on forecasting because of uncertainty. I have heard this so many times as a reason for not doing it. You may be surprised at how many certainties you can find once you start. Use last year’s figures as a guide so you are not starting from a blank page, then ask yourself some questions. Give it a go – remember, it’s a forecast, so it hasn’t got to be perfect!