End of year forecasting – why now’s the time to start preparing

As we approach the end of another year, it’s natural to start reflecting on the last 12 months and looking ahead to what’s next. And with many businesses having a December year end (it’s the most common year end date!), it’s the perfect time to dive into your year-end forecasting.

When you’re juggling the day-to-day operations of your business, the thought of sitting down surrounded by spreadsheets might seem a little daunting. But the truth is, forecasting isn’t just a nice-to-have, it’s an essential part of setting your business up for success in the coming year.

 In this post, we’re exploring why year-end forecasting matters, the challenges you might face if you put it off, and how giving yourself a head start can save you a lot of headaches!

 What is forecasting?

Don’t worry, you won’t need to grab your umbrella for this forecast! Business forecasting is the process of predicting what’s going to happen in the future based on past data and trends. It’s like creating a roadmap for your business, helping you plan ahead so you can make informed decisions.

It’s a common misconception that forecasting is only about numbers. In fact, they’re just the output from your thinking! The most critical part of forecasting is the actions you’ll take to get to get the results you want (including who’s going to take the action and when it needs to be done by).

Forecasting typically involves looking at things such as:

·         Revenue – How much money is likely to come in over the coming months/years?

·         Expenses – What costs will you need to cover (think wages, supplies and overheads!)?

·         Cash flow – Will you have enough money available to pay your bills when they’re due?

·         Market trends – What external factors (like customer demand or changes in the economy) might affect your business?

A good way to approach your forecasting action plan is to think “what results am I getting now?”, “how do I want that result to be different?”, and “who is doing what by when to make this change happen?”.

 Why forecasting matters.

 Forecasting helps you get a clear picture of your business’s financial health and where it’s headed. It’s a crucial tool for any business, no matter its size! With the right financial insights, you can:

 ·         Plan for growth – Knowing how your revenue might change can help you decide when to invest in new resources, expand your team, or even launch a new product. With a reliable forecast, you can plan more effectively and figure out if you have the resources to move forward.

·         Identify cash flow gaps – Forecasting can highlight periods where your cash flow might get a little tight, helping you plan ahead and avoid scrambling for funds at the last minute. If you see a potential cash flow gap, you can take steps to prepare (like cutting unnecessary costs or arranging for a loan).

·         Prepare for uncertainty – Whether it’s a global pandemic or a local market shift, unexpected events can happen. Having a solid forecast means you’ll have a better chance to adapt and stay resilient.

·         Informed decision-making – Instead of relying on gut feelings, a forecast gives you proper data-backed insights. This makes it easier to decide whether to stay the course or adjust your strategy.

·         Spotting trends – By looking at historical data, you can spot trends that might repeat in the future. This helps you anticipate busy periods, slowdowns or market shifts.

 Running a business can be time consuming and it’s not always easy to find the time to focus on forecasting. Being wrapped up in the daily operations means that planning for the future can feel like a luxury! However, without a forecast you’re flying blind into the next year, potentially leading to missed opportunities or nasty financial surprises.

 For many businesses, managing data can be challenge in itself. Without accurate, up-to-date financial data, creating a reliable forecast is next to impossible. Faulty forecasts could be just around the corner without the right tools or resources to collect and analyse your data effectively.

 The solution? Start early and get help!

 The end of the year might be fast approaching, but it’s not too late to get ahead with your forecasting. Your Right Hand have put together a free 13- week forecasting tool to get you started with the essential business planning process.

 1.       Start by gathering your current relevant data (such as your sales figures, expenses, cash flow statements and profit margins) and look at the results you’re getting now.

2.       Think about any external factors in the coming year that could impact you.

3.       Decide what headline results you want next year and set clear goals (for example, are your business objectives sales growth, expense management or a new product launch?).

4.       Identify what levers you need to press to create the results you want, and what actions you need to close the gap between this year and next year’s results.

 There’s a couple of different forecasting methods you could use, so find one that best suits your business needs. Then you need to use your historical data to make your sales projections, forecast your expenses, and estimate your cash flow. Don’t forget to factor in any unexpected shifts that could affect your costs or customer demand!

How can we help?

Your time is too precious to spend it struggling with spreadsheet or trying to tackle the forecasting on your own. By engaging with people who can do the legwork for you means you can focus on running the business!

If you’re feeling overwhelmed by it all, this is where our team of finance experts can make a real difference. We help businesses by:

·         Streamlining the process – We take the hassle out of collection and analysing your financial data, ensuring your forecasts are based on accurate, real-time information.

·         Offering unbiased insight – Sometimes, as a business owner, it’s hard to see the full picture. Our team provides a fresh perspective and will challenge your thinking, helping you spot trends and opportunities you might have missed.

·         Saving you time – By partnering with YRH Finance Team, you free your time to focus on running your business while we handle the numbers.

Ready to get started? Or want to make 2025 your best year yet? Reach out to our Practice Portfolio team. Don’t wait until the last minute – let’s start preparing today!