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  • What is Financial Forecasting and Why is it Important?

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  • What is Financial Forecasting and Why is it Important?

    Right now, there are a lot of worries about the Coronavirus and what is going to happen financially with small businesses.  We have been seeing the stock market tank, major events are being cancelled, appointments are being cancelled because of the fear of getting or spreading the virus. This is going to start hurting small businesses.  Unfortunately, some small businesses are not financially ready for it and it’s mostly because they failed to prepare.

    Many small businesses believe that only the large firms need to worry about forecasting, or they simply don’t understand what forecasting is. Forecasting is just that, forecasting the future financial health of your business, like a weather forecast.

    We have all watched the weather forecast at one time or another. Why do we watch the weather forecast?  We watch the weather forecast so we can be prepared for whatever mother nature has in store for us. Financial forecasting is the same thing. We create a financial forecast so we can be prepared for anything, good or bad, that comes with being a small business.

    Forecasting gives you the opportunity to look long-term at the health of your business and catching any problems that may be waiting to raise their head in the future. By using forecasting for your business, you are easily able to create what-if scenarios to see how various things affect your business. For example, the Coronavirus, while it is highly unlikely that all business will cease to exist it is highly likely that your business will take a serious hit and downturn. Do you have enough money in your reserves to continue paying essential employees or to continue paying your loans and bills which comes with running a business? Unfortunately, a lot of small businesses do not. Forecasting can help you see these possible problems before they happen.

    Obviously the Coronavirus is an extraordinary situation but what about natural disasters (which Tennessee was hit with one just a week ago from the writing of this article), war, competition, etc. All of these are things that could have a deep impact on your small business success.   Forecasting will also help you get an idea of the effect of more minor changes such as hiring an employee or taking out that car loan etc. All of these will have a long-term effect on your business finances. Set your business up for success for the long-term and start working on forecasting your financial health and stability now.

    If you are looking for somebody to help you work on making sure that your business is financially ready for anything that comes its way, look no further than Collins Bookkeeping Services. We are Certified Strategic Advisors with a passion for helping our clients get the information they need to make sound business decisions.

    Tracy Collins | 03/13/2020

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