Why is accurate and up-to-date financial forecasting so crucial for your business?
Imagine if you could see into the future of your business and determine approximately how much you were going to make, how much you would need to spend, and your expected profit and loss? It would make life a lot easier, but is it just wishful thinking?
No. With the assistance of business forecasting, you can accurately predict not only future trends but also get a clear picture of where your SMB is heading and how to get there.
With accurate forecasting, you’ll be able to analyze your business as a whole and get a clear understanding of what’s happening now and what could happen in the future.
What Is Business Forecasting and How Does It Work?
If we look closely at business forecasting and how it works, we need to understand what business forecasting is. Business forecasting is made up of tools, including AI programs, which not only evaluate historical data but also future data and often include analysis of sales, expenditures, profits, loss, and costs associated with producing and procuring material and wages.
The ultimate goal of business forecasting is to allow SMBs to develop better business strategies based on these predictions, reduce risks, and also avoid potential losses or failures before they happen.
Why Is Business Forecasting So Important for SMBs?
Business forecasting is an invaluable tool for SMBs because it will give them the ability to make smarter, more informed decisions that are data-driven.
There’s a big difference between investing in something you think could happen and making informed and educated business decisions based on accurate financial forecasting.
Accurate business forecasting gives your business the ability to make informed decisions based on how the current market looks and also predictions on how it’s going to look in the future.
AI business forecasting has been a game changer regarding accurate financial and business forecasting for several reasons.
Firstly, AI forecasting reduces the element of human error. The human error rate on data entry is anywhere from 1% - 5%. While that might not seem so bad, over a large amount of data, that could have a significant impact on your business forecast and cost your business a lot of money. If a data entry clerk transposes $61,000 invoice to a $16,000 invoice, that can have a huge impact on your statistics and forecasting.
Secondly, AI forecasting can process a lot of information a lot faster and do it more efficiently and accurately than humans. AI programs process all information without any human bias or errors to give you an unbiased and accurate forecast.
Finally, AI forecasting reduces the cost of business forecasting because data entry by humans is a very time-consuming and labor-intensive process. When you combine all three reasons, it’s clear to see why so many SMBs are switching to AI-based business forecasting.
Three Ways Business Forecasting Can Help Your SMB Succeed
- Assists you to Set Goals and Plan for the Future – With accurate business forecasting, your business will be able to set realistic and reasonable goals based on your historical data, current data, and future forecasts. It allows you to determine what you need to do in order to succeed and set realistic goals for your business. It’s an effective way to ensure that your business is on the right path and that your organization has realistic goals and targets in place.
- Helps with your Budget and Financial Planning – Being able to accurately predict what the future holds for your business, within reason, allows your SMB to budget more accurately. This could be both budgeting for future expenditures and also will enable you to allocate additional funds if the market is predicted to be lower than usual. Ultimately, you’ll have a better estimated and allocated budget for your business and a solid foundation as your business grows.
- Allows you to Anticipate Market Fluctuations and Changes – Obviously, even with the best AI forecasting tools, your business can’t account for all market influences, such as natural disasters, wars, and diseases. However, based on the analysis, excluding unpredictable events, you’ll have a much clearer picture of what the future potentially holds for your business.
Accurate Business Forecasting Data Is Still King
Accurate business forecasting will give your SMB visibility through data and allow your business to not only make more accurate future business and financial decisions but also change and adapt to ever-fluctuating market circumstances.
Having a small window into what the future holds for your business, months or even years, is a huge advantage. It allows you to make smarter financial decisions for your business long term instead of reacting to events and changes as they happen.
The sooner and more accurately your SMB can plan for the future, the better positioned it will be. Not only can your business make decisions faster, but those financial decisions will be based on sound data rather than guesswork.
If your business operates in a highly competitive field, where competition is fierce, the business that makes better decisions sooner will be better positioned long-term over the competition.
While financial forecasting can look and feel extremely intimidating, AI forecasting tools make the process easy and provide your business with the tools it needs to succeed in this highly competitive world we operate in.