As a CFO, one of the questions that gets asked often is “Can I afford expenditure X?”  Sometimes clients want a new truck, manager, location, or building.  A great tool to help answer these questions that I keep coming back to is the forecast.

Business owners need to know both whether or not they can afford something AND the level of risk they are taking on going forward.  In other words, we have to make sure that an investment you make today will not hurt you six months down the road.  For instance, if hiring a new manager is financially viable in the short term but will land you into trouble in the long term, then it isn’t a good idea to go through with it. 

The great thing about having a forecast is that it allows the business owner to determine both affordability and the risk associated with a purchase, investment, or acquisition.  The forecast allows us to know if hiring that new manager or acquiring that new location will be advantageous in the short and long term. 

It is this clarity that the forecast provides that makes forecasting a must for any business owner looking to take charge of their business!