Why Budgeting and Financial Forecasts are Important
In any business, it is vital to have as much information as possible to determine the best opportunities for the future of your business. Using budgets and creating financial forecasts can help aid your decision making and can even predict future revenue and expenses.
Forecasting is a planning tool that helps business owners better predict what could possibly happen in the future. It relies on data from the past and present and analysis of trends in the market. Forecasting involves a lot of guesswork, so it’s best to make sure you can back it up with as much data as possible. It also helps with planning next steps, can help you understand what needs to be done to grow, and can help create accurate budgets.
Why do I need Financial Forecasting?
- Helps to create a clear path to achieve goals.
- Creates trust and confidence in raising funds.
- Tells you what resources you need and when you need them.
Budgeting is important in any business, but especially in small businesses. Small businesses often operate on a shoestring budget and being even a little off could have devastating effects on the business. Budgets help organize finances including debts and expenditures.
Benefits of Budgeting
Budgeting can benefit your business in a number of ways. Including:
- Potential to attract investors
- Ability to set sales goals
- Chance to open lines of credit
- Ability to make decisions about salaries, bonuses, benefits and overhead operating expenses
- Easier tax preparation.
Dangers of not budgeting
There are risks to not budgeting.
- Businesses aren’t in position to expand.
- Can’t take advantage of investment opportunities.
- Can’t make long-term commitments to suppliers or customers.
- Could potentially lose existing business if the unforeseen happens.
- Denial of operating loans.
- Can’t purchase equipment.
- Can’t bid on government contracts.