Monitoring and tracking your business over time is crucial to achieving your long term profit goals and business growth. To look at your business numbers requires discipline and asking the right questions. Mark Dicus & Company would like to share what questions you should be asking yourself as well as why and how to forecast your business actuals.
Business Strategy Questions to Ask
In order to determine if you are achieving your goals there are some questions you should be constantly asking yourself and genuinely seeking answers to. Some of these questions are:
• Is my business on target to achieve the goals I have forecast?
• Where are the problem areas of my business that need more attention and correction?
• What aspects of my business need deeper investigation?
• Should I change my business strategies?
Analysis of Financial Statements
Reviewing monthly financial statements and then comparing them to the forecasted actuals should be done on a regular basis. Creating a schedule that you routinely follow is important to make proper assessments and providing you time to make any needed adjustments. Given the right amount of time, you may be able to renegotiate product costs, identify expense line items and make needed reductions. In addition, you can raise sales prices to reach your forecast goal.
Forecasting Techniques
Many business owners will wonder how to make these changes and achieve their forecasted goals. During the process of constructing your forecast, you will need to first set goals for your sales, gross margins and expense. As each business is very different, the goals will differ. When constructing your forecast goals, make sure to construct a “Notes to forecast”. Note to forecast is a document that details the assumption of the plan to reach your goals. Knowing the assumption can help you analyze the business actuals of the forecast. Assumption, which is based on the forecast, can be compared to the actuals to see if you are meeting your goals. If the comparisons do not match up, then you will need to begin looking for flaws in the construction of your goals.
Forecasting Methods
When constructing a financial forecast and ensure that the actual meets your forecast goals, you will want to create the following spreadsheets.
• Current Monthly Actual to Forecast Comparisons
• Quarter to Quarter Comparison to look for trending problems
• Year to Year Actual Comparisons
Statistical Forecasting
When reviewing and analyzing these spreadsheets, some of the top points to consider are the following:
• Evaluate the various categories of sales by product or services and their gross margins percentages and expenses.
• Look for repeating trends in the monthly and quarterly sales, gross margin percentages, and expenses.
• Make note of seasonal trends and or issues that can impact your forecast, namely the sales and expenses.
• Compare the year to year spreadsheet to the quarterly in order to spot any unseen issues.
Bookkeeping, Accounting & More in Salt Lake City, St. George, West Valley City, Provo, Orem, West Jordan & Greater Cedar City, Utah
Forecasting can be very difficult depending on the nature of the company. At times the actuals or profits never reach your overall goal and business growth. To help create a realistic forecast in helping your business grow, consider seeking professional accounting and bookkeeping services. For quality accounting and booking services, contact Mark Dicus & Company today.