Question

How does financial planning help in forecasting? State.

Answer 1

The lack of planning and control of cash resources is the reason often given for the failure of many small businesses. By undertaking good financial forecasting, businesses can help reduce this business risk.

Much like a map helps you plan a long road journey, a financial forecast (often called a business plan, cash flow or forecast) helps you achieve your goals and get your business to where you want it to be.

A financial forecast is simply a financial plan or budget for your business. It is an estimate of two essential future financial outcomes for a business – your projected income and expenses.

Predicting the financial future of your business is not easy, especially if you are starting a business and do not have a trading history. This is where Leonherman can help, we are experienced in preparing financial forecasts that are both achievable yet still challenging.
Advantages of an effective financial forecast:

Demonstrates the financial viability of a new business venture. Allowing you to construct a model of how your business might perform financially if certain strategies, events and plans are carried out

Allows you to measure the actual financial operation of the business against the forecast financial plan and make adjustments where necessary

Allows you to guide your business in the right direction and take control of your cash flow

Provides a benchmark against which to measure future performance

Identifies potential risks and cash shortfalls to keep the business out of financial trouble

Provides an estimate of future cash needs and whether additional private equity or borrowing is necessary

Assists you to secure a bank loan or other funding, lenders and investors require financial forecasts to show your capacity to repay the loan

Leonherman offer business planning and financial forecasting services to businesses that are looking towards the future and want to plan how they can grow and develop.