How to Use Your Numbers to Forecast for Financial Growth

When you hear the word “forecast,” you probably think of the weather – and of how inaccurate weather forecasts can be. This is totally understandable! Forecasting in your business can feel the same, like you’re just making educated guesses and hoping they pan out… that is until you hone your skill of using your numbers effectively. That is when you can reach some incredible goals with confidence!

Numbers are something that is intimidating to many business owners. This isn’t because it’s especially difficult, but because most of us were just never trained in it. When you have the right resources and training, however, the process becomes a lot easier.

I can’t lay out all the details in a blog post, but I can give you a solid overview. If you would like to dig further into your numbers and learn how to use them for accurate forecasting, let me know – our Financial Controls Coaches are amazing to work with!

Step 1: Get Your Financial Reports in Order!

This is often the step that stops a business owner. Which reports do you need? How often do you need them, and where do they come from?

And most importantly, once you have them, what on earth should you do with them?

If this is where you’re at, no judgment. Believe me, I’ve been there – having to work with my numbers used to result in a lot of frustration and tears.

I knew whether money was coming in or going out, and I knew if I could make payroll, but that was about it. It wasn’t uncommon for me to wake up in a panic in the middle of the night, wondering if various payments would be covered.

When it came to profitability and planning, I really didn’t have a clue. I just plunged ahead and hoped for the best. (Spoiler: this is not a sustainable strategy.)

The first step to getting your financial house in order is to have your Bookkeeper pull the right reports on a regular basis and submit them to you for review. There are some reports which I get and review weekly, but my main deep dive happens with our monthly reports. These include:

• Profit & Loss Statement: The purpose of a P&L is to help you understand where your money is going. All too often, business owners will see the money come in and go out, but they don’t take the time to see where the money is going. In addition, you want to understand what percentage of your money is going to various categories like marketing and overhead.
  
• Balance Sheet: It will become your second most important report, as it tells you your assets and liabilities. Your goal is to build up your assets and equity as you grow. One caveat with this report: you’ll want to pull it on the same day every month. If you pull it right before a large payment is due, it may show a huge liability; if you pull it a day or two later, it will probably look like everything is fine. By pulling it on a consistent day each month, you’ll be able to build a historical picture that will allow you to plan accordingly.
  
• Budget and Variance Report: Just like you build a budget for your household, you also need to create a budget for your business. (Having your P&L handy makes this process a lot easier!) Essentially, your budget is your business plan in number form, showing your forecasted revenues and expenses. This report will help you see whether you’re on track with your plan or if you need to pivot in any way.
  
• Accounts Receivable and Accounts Payable Reports: You’ll want to stay on top of these! Knowing which invoices are outstanding will help you keep a stronger cash flow – and knowing what payments are coming due will help you plan effectively.

Step 2: Build Your Financial Dashboard

A Financial Dashboard is a tool that lets you keep all the data you need at your fingertips so you can plan and forecast without having to dive into a ton of reports. You still want to review and understand these reports, but you shouldn’t have to do hours of research every time you sit down to plan.

Building a strong Financial Dashboard does take some effort, but once it’s in place, it will save you a ton of time. There is no “one right way” to build yours, as each may look a bit different; the structure and data will depend on your goals, your industry, and your stage of growth.

This is where I strongly recommend working with a solid Financial Controls Coach – someone who will take the time to get to know your business, help you plan out your goals and strategies, and dig into the details to help you build the dashboard that best works for you.

Step 3: Calendar in Time to Plan

How often do you work on your business instead of in your business? For many business owners, the answer is “not enough.”

This isn’t because you’re intentionally neglecting your planning time, it’s because you’re just plain busy. Again, no judgment. Believe me, I get it!

Even though you may have the best intentions to take time for planning, there are a lot of demands on your time. If you don’t intentionally calendar these times in throughout the year, you’ll find yourself acting reactively instead of planning proactively.

Something that I’ve found to be effective is to meet with my EA periodically to schedule out my meetings, work times, and planning times for the next few months. That way, these appointments are on my calendar and they happen. They don’t get eaten up by everything that pops up throughout the week, demanding your time.

When you have the right data, the right tools, and time set aside to plan and forecast, you’ll find that you’ll be much more prepared for growth. And when you’re prepared for it, it’s much more likely to happen!