Cash flow is the life-blood of every business. For a small business, cash flow can make or break its ability to survive. If you want to adopt a proactive approach to managing your small business, then it is important that you enlist the help of a CPA who can assist with financial forecasting. A professional can help you fine-tune your business plan and know what to expect in the future.
What is Financial Forecasting?
A financial forecast is derived by trying to estimate two things. These are the income that the business is expected to receive and the expenses that it is expected to have to pay. A cash flow analysis, or forecast, performed on a regular (usually monthly) basis will demonstrate if the income generated by sales produces sufficient cash to pay for obligations. This information about your cash balance clearly reveals a positive cash flow (net gain) or a negative cash flow (net loss). Monthly cash flow projections compare previous projections with actual figures. Over time, principal changes will become apparent.
When a financial forecast is developed, it shows an estimate for the future economic outcomes of your small business. Internal accounting methods are analyzed, along with sales data and upcoming business activities, to determine the trajectory of income that you can expect in the near future.
This process considers the goals of your company and compares them with the daily priorities of management and employees. By understanding these forecasts, you can determine whether there is internal consistency in your business, helping you to reach higher levels of success in the future.
Benefits of Outsourcing Financial Forecasting
Many software accounting programs have features that simplify cash flow analysis. A professional accountant can create a cash flow analysis tool that is unique to your business. When talking with accounting firms about the services available, it is important to ask them about the ongoing support that is provided and whether forecasting is included. By using tools such as cash flow management and forecasting, you can estimate product demand to make sure that you can fulfill all customer orders in the future.
Additionally, financial management and forecasting helps to improve the profitability of your company and keep you looking forward to the future. You can stay competitive in the market, and learn from past financial mistakes that occurred.
Charles P Myrick CPA is a tax preparation firm providing accounting and bookkeeping services to clients throughout the Washington, District of Columbia area. We provide our small business clients with cash flow analysis and forecasting to help analyze spending, and re-balance budgets and/or debts for an optimal cash flow. If you are interested in virtual business services and outsourcing your daily financial management, we invite you to contact us today. We can discuss all the options that are available for your small business. (202) 789-8898