As an entrepreneur you have to juggle many responsibilities, especially when you are trying to start the business. From marketing to product development, it’s important to make sure everything goes smoothly as a founder. Although it may be tempting to just focus on other things, there are many advantages to making a business plan with detailed financial projections. Here are several ways your business can benefit from using forward focused financials.
Forecasting Can Help You Develop Goals and Make Decisions
One advantage to making financial reports that focus on projections is that it can help you develop clearly defined goals. Everyone will also work harder to make sure the company achieves them. You can always compare the actual sales revenue, expenses and other results with the projections later. Financial projections can help guide you towards making sound strategic decisions.
Forecasting Gives You A Picture of Your Company’s Possible Financial Future
When the company’s accounting information is in front of you, it makes it a lot easier for you to get an overall picture of your company’s financial health. Forecasting can give you an idea of what your company may earn and spend in the near future. You can also use the information to brainstorm different ways to cut costs and earn more revenue.
If you aren’t good with numbers and don’t have adequate training, we recommend working with a reputable accountant and bookkeeper. They can prepare monthly and quarterly sales forecasts for your company. After reviewing the forecasts you will know the company’s breakeven and other important information.
Forecasting Gives Investors Confidence in Your Business
Are you thinking about raising money from a venture capitalist, angel investor or the bank? If so, they will expect detailed financials with realistic projections. When you include financial projections in your business plan, they can understand how your business will stand out from the competition and make money. A business peer or investor can also look at the forecasts and offer advice to make the projections even more realistic.
Forecasting Can Help You Monitor The Company’s Growth
Forecasting can also help you monitor your company’s growth over time. By anticipating changes and other factors, you can make better strategic plans. For example, if your company sells toys you can assume there will be a spike in sales during the holiday season. You can use financial projections to determine how many temporary employees you will hire to fulfill the orders and customer service agents to answer the phones. As your company grows, you can look at the financials to spot potential opportunities to boost sales revenue.
Forecasting Can Help You Predict The Company’s State and Federal Taxes
Lastly, forecasting can also help you predict how much your company may have to pay in state and federal taxes. After looking at the projected sales volume, your financial accountants can calculate how much the company owes the government. Tax professionals can also use the information to make tax recommendations.
We understand how challenging it is for entrepreneurs who want to create their own business. Although your startup may not have previous sales history to make financial projections, financial professionals can do some research and use industry data and other information from similar companies to make detailed documents.
Please contact us today for more information. We’d be happy to chat with you during a consultation to find out how we can help your business. Our team of experienced tax and accounting professionals can prepare your financial documents using accurate and realistic financial projections. At GMLCPA, our highly skilled strategic business advisors understand how to improve your company’s bottom-line.
