Why do we forecast? Well, business and cash flow forecasting gives us a better chance to determine what tomorrow may bring, as well as reduce fear and overwhelm that the uncertainty of the future of the business causes.

The forecast continually updates itself when we plug the actual results into the model each month. As a result, almost every possible question is answered today and in the future. And many times decisions get clearer just by waiting for a few months for actual results and seeing

the forecast change. One huge advantage of forecasting is the foresight you get. In many of the cases, if you know something is going to happen or even could happen in advance, you're more likely to be able to resolve the problem ahead of time, increasing the quality of the decision and the control you have of your business.

The most common two words we business owners say is “What if.” The reason we say what-if is because we wanna cover all the opportunities and risks so we can take control of the situation, take control of our business. After all, we want to know: what if sales increase or decrease? What if profit margins increase or decrease? What if you bought more efficient equipment? What if you did more advertising and it didn't produce the results you expected? And what if you added a field manager to overhead? These are just some of the what if questions.

 A professional forecast should contain at a minimum, a forecasted monthly income statement forecasted monthly balance sheets. And by the way, this is a real differentiator. You can tell immediately, an amateur forecast from a professional forecast by the exclusion of a monthly forecasted balance sheet. In addition, forecasted monthly cash flow statements, a forecasted monthly inventory plan if you have inventory in your business, a forecasted monthly trade, accounts payable plan, key performance indicators, and through this process, we'll be able to identify the most effective business model you can have.

Is the forecast a crystal ball? No, of course not. But that is why a professional forecast creates multiple What if scenarios encompassing every likely possibility that your business can encounter. When the C F O and the business owner who understands the current climate for the business and the industry work in concept, they can produce the most likely scenario and develop a going forward strategy.