Business forecasting is one of those things that’s easier said than done. But at the end of the day, it’s more difficult to run a company without doing it.
First, let’s clear up a common misconception: Business forecasting is not the same as guessing. Entrepreneur explains:
We’re developing sets of assumptions. We’re looking at drivers for sales, realistic assumptions for expenses. We draw from experience as much as we can and from research. It’s a forecast, not a guess.
So if you’re forecasting sales of a tangible product that will make its way through retail stores, for example, there are certain things to take into consideration:
- Approximate expenses
- Feasible expectations for resellers
- A thorough understanding of how margins work
This is just one example (obviously not every business sells physical products), but you can understand how the principle applies across the board. Over time, your business forecast will become more accurate, and you’ll have a better idea of how sales, costs and expenses work together.
What it all comes down to is cash flow. To effectively manage your company’s cash flow, you’ll need to get good at business forecasting.
If you’re in a cash flow crunch, the experts of RMP Capital can help. Our Accounts Receivable Financing Program can help you use the power of cash by tapping into your Accounts Receivable — usually a frozen asset — and converting the Receivables to cash on a daily basis. Give us a call to learn more: 631.738.0047.