Trusting Your Financial Forecast Unlocks Confidence

If you haven’t been using financial forecasting tools for your SMB, you’ve been wasting time and money!

Every business has goals they want to reach, perhaps next year, the year after, or even ten years from now. If your business doesn’t have goals, then what are you waiting for?

If you do have business goals, then you probably have a rough idea of how you’re going to achieve them and also the benchmarks you need to hit along the way.

It could be how many new products you will add, revenue goals, or perhaps growth goals. However, without a detailed financial forecast, how will you achieve your goals? How much revenue are you expecting? How much will you need to spend? What does your profit and loss look like for the next year?

These are just some of the questions financial forecasting could answer for your business.

Why Every SMB Needs A Financial Forecast

A common mistake many businesses make is putting present and past financial data ahead of modeling their business on future forecasting. Falling into this ‘rear-facing’ financial strategy is an easy mistake to make.

We all understand the importance of keeping accurate financial records. Some of the benefits of great bookkeeping include:

  • The financial health of the organization.
  • Whether you’re making money or losing money.
  • You can meet your financial obligations, such as wages, operating costs, and paying suppliers.

However, what it won’t tell you is what’s potentially coming in the future.

A financial forecast takes your historical performance, compares it to market and competition data, analyzes trends, and then creates a short or long-term financial forecast for your SMB.

Running an SMB with no financial forecasting is like driving at night with no headlights on. When you get accurate financial forecasts, it’s like turning on the headlights for your business.

If you’re running a small business, chances are you don’t have a CFO, or you’re fulfilling that role yourself. While getting an accurate financial forecast can feel overwhelming or expensive, it doesn’t have to be.

Kamino offers accurate and affordable financial forecasting for SMBs using their AI Financial Management and Prediction Engine.

In a survey conducted by the Institute of Business Forecasting, they found that by improving financial forecasting accuracy by only 1%, the surveyed businesses could save between $970k and $3.5 million.

While this study looked at large businesses and organizations, it’s important to note that they saw significant savings on only a 1% improvement in financial forecasting. Many SMBs that have no current financial forecasting would see much greater improvement.

3 Reasons Why Your Business or Organization Needs Accurate Financial Forecasting

For a lot of SMBs, hoping for the best and preparing for the worst is the limit of their financial forecasting. However, sitting back and waiting for something to happen and then accepting whatever comes your way isn’t the best way to achieve financial growth or success for your business.

1. A Financial Forecast Creates A Clear Path to Achieving Your Business Goals – When you’re only focused on the next week or month, you start to get tunnel vision when it comes to the future. It’s an easy way to lose sight of your long-term goals. If you have a clear vision of long-term goals, you can work towards them without getting sidetracked along the way.

2. It Will Create Trust and Confidence In Lenders When Applying for Loans or Raising Capital – Most SMBs will, at some point in the life of their business, need to raise capital. It could be for business growth, expansion, or to cover a short downturn in the market. While a feel-good story or a long-term relationship are great, financiers aren’t lending you money based on your story. They’re looking at what your long-term goals for success are and how much money you’re planning on making in the future.

3. A Forecast Will Tell You What You Need and When You Need It – If you have a goal in mind, and you’re asking questions like ‘What cash, products, infrastructure, employees, or sales will I need to achieve x?’ then you’re already starting to ask some of the right questions. Accurate financial forecasting will help you answer all of these questions and more and do it in a way that helps your SMB grow.

Trusting Your Financial Forecast Unlocks Confidence – Conclusion

Getting an accurate financial forecast is the first step, but trusting it is the second. If you don’t trust your financial forecast, you’re not going to follow it, and it’ll basically be useless.

Intelligent and accurate financial forecasting is the closest thing you’ll ever get to having a glimpse into the future and could ultimately mean the difference between short-term success and long-term failure and long-term success.

If your SMB doesn’t have a CFO, then don’t worry. It doesn’t mean that you can’t access accurate financial forecasting. Thanks to Kamino’s AI Financial Management and Prediction Engine, you can access accurate and affordable financial forecasting for your SMB.

As Bill Gates says, “It’s fine to celebrate success, but it is more important to heed the lessons of failure.” Don’t just learn from what you did right. Look at what you did wrong and learn how to prevent it from happening again in the future.

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