Would you make a business decision based off what happened up to 11 months ago?
Likely not. But we see businesses do this, often.
Businesses are forward moving. Business owners should then be forward thinking.
When starting new clients, we see them making business decisions based on their budget. This budget could have been created up to 11 months ago and the numbers included on it may be outdated and no longer relevant.
While the budget is a very important business tool as it sets expenses as a percentage of anticipated revenue to ensure a desired profit level, it becomes historical the moment it is created.
For instance, a number of situations can occur that affect the bottom line on the budget:
You land an unexpected, but big, account.
You unexpectedly lose a big account.
A supplier discontinues their product line that you really, really need.
..and so many more situations that can positively or negatively impact your business.
Once a budget becomes historical, it’s a less accurate tool to use when making critical business decisions.
To help avoid this problem, we encourage our clients to create and use a forecast. This forecast will show what financials are anticipated to be, which makes it so much easier for them to make wise decisions.
Making decisions using an outdated budget will have you look at what was thought to happen, while making decisions using a forecast will have you look at what will happen.
Many things can happen throughout the year that make a budget obsolete. New initiatives, unforeseen opportunities, or the loss of a key customer are just a few. Rather than redoing the budget when these situations occur, have a forecast for the next 30, 60, 90 days and update it at least once every month.
In business, it’s imperative we make the best decisions we can based off the best data we have in order to maximize our chance for success. Having a clear financial picture looking forward and how potential decision scenarios affect that picture (versus looking back at what you thought might happen) is indeed the best way to make it happen.
We offer a secure way for businesses to easily create a forecast and an annual budget. Though the cloud, businesses can create, review, and update their forecast and decision makers can access it anytime. Contact us to learn more about the STUCK Breakthrough Strategies Platform, its tools, and how they can help your business grow.