It's part of my training as a management accountant and I spent many years as a retail accountant compiling company budgets and forecasts so I guess it is in my DNA now.
I've developed a simple but accurate template for this and with a day or so's effort my first draft emerges from the magic of Excel and I can reflect on how it looks. Inevitably it's below my expectations. After allowing for clients who have stopped trading or their circumstances have changed and factoring in cost increases and new costs, I'm usually left with something of a gap between where I want to be and where my forecast is pointing. So although a bit disappointing, that's not necessarily such a bad thing. At least now I know there is a gap and I can think about what to do about it.
The two ways to close the gap are more sales and reduced costs. I will always give a lot of thought to how we can increase sales - attract more customers, look at the services and value we offer to our existing customers and what new services can we offer. As far as cost reduction goes, a proportion of our costs are fixed but some are discretionary. I will look at these and ensure they provide good value for money and are affordable. So with some tweaking and decision-making I will start the financial year with a forecast that shows a good improvement on the previous year and a plan to make it happen.
In some ways this is the easy bit. It's the month in, month out effort to deliver the plan which is the bigger challenge. I find this annual forecasting process really valuable and an essential part of my business routine. It gives me comfort that we have a plan to move forward and something to measure against during the year.
So here is to another good year with more sales, satisfied customers, more customers and more profit. That's what the plan says so we now need to roll up our sleeves and do it.
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