No matter the kind of business you own or the work you do, the holidays are a busy time for everyone. From planning the office holiday party to sending out client gifts, we all may find ourselves overwhelmed with the new miscellaneous jobs at hand.
Aside from all of the festive holiday activities, you likely have a few end-of-the-year tasks that have flooded your to-do list. Accessing the prior year’s analytics, managing forecasting, and preparing for the new year, show up on the desk of every CEO.
It may be even tempting to delay some of these tasks until the calendars change over….
Despite the exhausting task list, there are some you should not put off until the new year. One of those is creating your financial forecast.
Financial forecasts not only help you plan out the new year but they can provide immense help in tackling the holiday season. From assessing holiday bonuses to grabbing a few last deductions before new years eve.
In the upcoming article, we are going to discuss how creating a financial forecast can help your business over the holiday season.
Defining A Financial Forecast
If you have never compiled a financial forecast then you may be wondering what it is or how it can help your business. In short, a financial forecast is a report compiled using historical data to make predictions about what will happen in the future.
This can be helpful to both steadily growing businesses and to businesses that have seasonal highs and lows.
For example, real estate agents may have especially busy summers with slower winters. These sorts of seasonal ebbs and flows can be an excellent reason to create a forecast and later, a budget.
An important part of that financial forecast definition was the “historical data”. This is needed to help predict future outcomes. Without this information, you may be relying on unreliable data. For this reason, new businesses may struggle to compile a financial forecast.
It is also worth considering uncommon events affecting your data. For example, in the last few years the economy has been drastically impacted by the pandemic and we are still seeing the ripples from those difficult times. This may conversely affect your data and make it more difficult to predict what will happen in the future.
How Creating A Financial Forecast Can Help Your Business This Holiday Season
Building A Budget
A very clear benefit of compiling a financial forecast is the data it can provide to help you build a budget. If you are noticing trends such as an increase in revenue of 10% over the holidays, you may feel more comfortable with a bit of extra spending towards marketing, employee bonuses, or even the office holiday party.
Let’s say you consistently put $5,000 towards advertisements during the holiday season. As a result, you see a 10% increase in sales. You may feel confident that those numbers will continue again this year.
You may also feel like it is worth the risk to maybe put $7,500 towards advertisements to see how it affects your upcoming sales. Knowing you have historical data stating a 10% increase is expected, you may be able to budget the extra $2,500 if the advertisements.
This can leave you feeling more comfortable knowing even if your sales do not marginally increase, they should provide you with enough cushion to cover the risk.
Leave Room For Capital
A major reason for considering compiling your financial forecast now is because of how hectic the holiday season can be. This is especially true for seasonal businesses that find an uptick in activity during the holidays.
The increased activity may mean you need to bring on more workers, supplies, or even financing. To properly prepare these investments ahead of the holidays a financial forecast can show you where capital is needed.
These financial forecasts can help you determine:
- Cash flow
- Labor needs
- Supplies or equipment needed
- Additional resources needed for your business
Sure, you can make some guesses about what to prepare ahead of the holidays but financial forecasts will make those gut feelings confident decisions. Ensuring you get the most out of your investment.
Get Started Today
We are in the thick of the holiday season which means you can begin working today on your financial forecast and use it tomorrow. Not only will it be helpful during the holidays but you will find it supplementing your new year planning as you plan budgets and forecasts for the new year.
If your business is facing the holiday season with uncertainty about how to proceed or excess capital you are unsure of how to handle, consider reaching out. Helping you make the right decision with the information available is where we excel.