A Financial Forecast/Budget Will Provide You With All The Data You Need To Make Important Decisions

Budgeting and forecasting are great ways for every entrepreneur to set out goals and targets for their business.  As an accountant, I love numbers, I love the stories that it can tell, and I love to see the information that it can provide my clients.  Budgets and forecasts help to supply all of the additional information that a standard set of financial statements simply can’t layout.

Think of It As Your Financial Vision Board

A forecast is great for dreaming, wishlists, and vision boards.  It allows the business to see what could be possible in the future. Forecasts could be created for one year, two years, five years or even 10+ years. This gives the business owners, directors, employees, banks, and investors an idea as to where the management of the company sees the business headed.  Many times, this is the information that an investor will look at to see if they want to invest in the company.

It’ll Help You Stay on Track

A budget provides a guideline for a business to see what the company expects it to achieve in sales or to monitor its costs on an annual basis. I like to think of it as a company’s Bearing Point.  Generally, this budget is prepared on a month-by-month basis. It isn’t exactly a cash flow statement by month, but it is similar.  

It provides an ongoing and current mechanism to monitor the company on a month-to-month basis. A budget can let management know whether they need to adjust their sales targets or product mix for the rest of the year. A budget can also let a company know if a particular division is struggling more than another division. 

For small business owners, a budget can help you plan out a year so that you don’t get distracted from your ultimate goal. There are always great new opportunities that arise, but rather than chasing after the next “shiny red ball”, a budget can help a business owner reflect (quickly) on whether or not the new opportunity will help or hinder the business based on what was already planned out for the year.  

I highly recommend that all companies prepare a budget and a forecast each year. Generally, this should be done during the latter half or quarter of a company’s fiscal year. This way, you have a significant amount of information from the current year and you have some idea of what the coming years are going to look like.  

This doesn’t have to be done with a lot of detail. But it should include information that will be usable to the company to analyze and will help the business in its decision making throughout the year.  Sometimes, just spending some time brainstorming about it for a couple of hours and then inputting the information into a spreadsheet is sufficient. If you are using an accounting software package, the majority of them have a budgeting function available to you. Your accountant or bookkeeper will likely be able to show you how to access this.  


Dayna Holland, CPA, CA (she/her)

CEO of Dayna Holland Ltd.

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