Whether it comes to your personal account or your small business finances, it’s important to have an idea of what your cash flow will look like in the future. With that knowledge, you can make wiser decisions in the present. For example: Should you be saving up for a slow business quarter? Or is it the right time to make an investment? Financial forecasting and planning are the keys to more prudent money management.
Financial forecasting involves estimating income and expenses. A forecast can help you plan for the next month, the next quarter, or even the next year. The time frame really depends on your personal or business needs.
Financial forecasting methods tend to be either qualitative or quantifiable.
When historical statistics and trends aren’t readily available, qualitative methods rely on expert opinions to make future estimates. If you’re running a small business, you might even consider using surveys to gauge customer opinions. You can then make reasonable predictions based on the collected information.
If enough data is available, quantitative methods can be used to make predictions. These methods can range from analyzing historical trends to considering established cause and effect relationships. It might seem obvious, but looking at sales figures from past years can also be a smart quantitative way to develop a financial forecast.
Forecasting often requires you to take into account a variety of potential scenarios, so you’re ready to handle the most likely outcomes. It can be especially useful when certain factors are out of your control but will impact your finances nonetheless – such as another business opening nearby.
Having a forecast isn’t always enough to ensure success. You’ll need to take action if you want to make the best of your acquired knowledge. That’s where financial planning comes in.
Services like Oak Street Investments will assist in a range of financial planning strategies. These services can cover a number of planning aspects, including:
- Goal setting: Coming up with specific objectives and milestones to reach for
- Retirement planning: A constant process of reevaluating savings
- Insurance planning: Weighing your options in terms of insurance policies
- Risk assessment: Evaluating the safest financial moves to make
- Education planning: Preparing for higher education pursuits
Financial experts will work with you to come up with a list of actionable steps to take. With a step-by-step roadmap in front of you, it’s easier to achieve your personal and business-related financial goals.