[et_pb_section fb_built=”1″ custom_padding_last_edited=”on|phone” _builder_version=”4.23″ custom_padding_tablet=”” custom_padding_phone=”0px||||false|false” global_colors_info=”{}”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.23″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_padding=”||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” pac_dcm_carousel_specific_module_num=”0″ border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” locked=”off” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” pac_dcm_carousel_specific_module_num=”0″ global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Copy paste body text here” _builder_version=”4.22.1″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n
Although business forecasting is most certainly based on quantitative data, historical performance, solid reporting, and a reasonable appraisal of current conditions, one could easily argue that business forecasting is as much of an art as a science.<\/p>\n
As a bookkeeper or advisor, being able to predict what might be coming for a business is of the utmost importance for your clients \u2013 in fact, forecasting can form a very important service pillar<\/a> in your business model.<\/p>\n To fend off uncertainty, make better decisions<\/a> and stave off – or prepare for – potential disaster\u2026 any company worth its salt will benefit from business forecasting services.<\/p>\n The good news? As a trusted advisor<\/a>, you may well be perfectly positioned to provide these services.<\/p>\n By gathering enough historical data<\/a>, a business forecast endeavours to accurately predict what\u2019s in store for a business, over a future period.<\/p>\n Indeed, for bookkeepers, accountants, and business advisors, a large part of forecasting involves gathering and interpreting business performance data. Historical records detailing things like cash flow<\/a>, expenses, sales, consumer behaviour, market shifts and previous budget determinations are collected and analysed for patterns.<\/p>\n Pattern identification is key to the art of business forecasting. Once a pattern is defined within a dataset, it\u2019s possible to make relatively accurate predictions (with many caveats) on what may come next. From there, businesses can make more informed decisions<\/a> on how to behave.<\/p>\n As a business, flying blind and forging ahead without guidance is fraught with chance. No business owner in their right mind wants to navigate the future without some kind of idea as to what to expect ahead. This is why business forecasting is incredibly valuable<\/a>.<\/p>\n Often, your business clients will know or decide exactly what they want to predict. They may be seeking answers to questions such as: \u201cWill consumers want to pay $100 for this product?\u201d or, \u201cWhat will my profits look like next March?\u201d<\/p>\n Predicting accurate answers to these questions helps to inform how a company can best act to remain profitable<\/a> and achieve healthy growth or stability. And, the intrinsic value of business forecasting then becomes immediately clear.<\/p>\n [\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2023\/09\/JOB230204_-_SBH_images_-_business_forecasting.png” alt=”Bookkeeping Marketing Strategy” title_text=”JOB230204 SBH Images Business Forecasting” align=”center” admin_label=”Image” _builder_version=”4.22.1″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text admin_label=”Copy paste body text here” _builder_version=”4.22.1″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n The processes behind forecasting are in constant flux. With the advent of big data<\/em>, artificial intelligence<\/a>, and new software tools<\/a>\u2026 business forecasting services are becoming easier to deliver and more accurate. Accounting software reports often form a good portion of the data you can draw predictions from. Plus, there\u2019s a vast cross-spread of software and financial modelling tools that will be of great service in this endeavour.<\/p>\n However, regardless of the exact software tools or methods you may use to form predictions, there\u2019s a common theoretical business forecasting process:<\/p>\n 1) Define your problem or data point 2) Decide on data sets and variables 3) Make some basic assumptions 4) Put forward a prediction model 5) Undertake analysis 6) Verify your forecast While this is a basic business forecasting technique, there are certainly different ways of going about it, and a lot of complexities to the craft, once you get into the work.<\/p>\n When you arrive at your business forecast, you should use professional methods of presenting the data, (including the methods used), to your client.<\/p>\n Generating graphs, charts, and presentations to advise on actioning your insights will form the core of how you present the work.<\/p>\n There are two primary business forecasting methods \u2013 qualitative and quantitative. Let’s unpack these two types of business forecasting.<\/p>\n Qualitative business forecasting Quantitative business forecastingWhat is business forecasting?<\/h2>\n
Why is business forecasting important?<\/h2>\n
How do you do business forecasting?<\/h2>\n
<\/strong>Decide on what it is you want to predict. This may be future sales, upcoming price changes or budgets<\/a>.<\/p>\n
<\/strong>Choose which data sets will be used to underpin your prediction and what variables will be involved in your modelling.<\/p>\n
<\/strong>To save time and data crunching, as a bookkeeper<\/a>, accountant, or business advisor, you can often make some basic and reasonable assumptions about your client\u2019s data.<\/p>\n
<\/strong>You then need to decide on a prediction model that fits your data set and accounts for variables, along with your underlying assumptions.<\/p>\n
<\/strong>It\u2019s now time to analyse your data using your chosen model. From your analysis, you\u2019ll arrive at a business forecast or prediction for your client.<\/p>\n
<\/strong>Now that you have your prediction, you can test it over a short period to see how it pans out in reality. From here, of course, you can adjust accordingly.<\/p>\nPresenting the forecast to your client<\/h2>\n
Types of business forecasts<\/h2>\n
<\/strong>A qualitative prediction relies more heavily on the \u2018expert\u2019 factor. It involves looking at things like market research<\/a> or consumer behaviour. Where solid data may be scarce \u2013 assumptions on future trends<\/a> are made based on your experience and expertise.<\/p>\n
<\/strong>Quantitative forecasting is much less reliant on expertise, and much more based on solid data. When you remove the human factor, along with assumptions, and instead lean on past and present sales<\/a>, expenses and cash flow data; your predictions will naturally be more reliable (although certainly not exempt from error and inaccuracy\u2026)<\/p>\nBusiness forecasting only goes so far\u2026<\/h2>\n