Business plans, budgets, forecasts…It’s enough to send you to sleep!
Mention these words to a business owner and watch their eyes slowly glaze over! However, word of warning, those three [well four] words are some of the most critical to your business success so keep reading!
As a business Adviser, I get to share practical insights and information that helps business owners run better businesses. For a business to be a success the owner needs to have confidence that their business adviser is honest; tells them precisely what they need to know and can be trusted which is paramount.
One of the most critical aspects of business is predicting the future. Will the public buy my product? What makes my product or service different to any other business offering? What are my key targets? How many products do I need to sell to make a profit? Where is my cash going?
Talk to any successful small business, and they will tell you that a three-way forecast, including a cash flow budget, is a must. Most of them will also reveal that that’s not their area of expertise which is why they engage a business adviser like myself; someone who loves the numbers understands them and more importantly knows how to use them to improve a business.
Three key things that a three-way forecast should include
One of the things that clients hear me say is, ‘you can have all the turnover or profit in the world but collecting debtors and having money in your bank is key’.
Tip: Monitor debtor days and extend or get payment terms for creditors (suppliers)
Ten reasons why every business needs a three-way forecast
The most important aspect of a three-way forecast is what you do with the information. It’s nice to have one but having it collecting dust is just not cool!!
It is recommended that an adviser produces a full three-way forecast that asks the right questions, sets goals and most importantly puts actions in place to monitor performance. Whether it be monthly or quarterly, watching anything is key.
At Collins SBA we use a software called Castaway which prepares the three-way forecast and lets you enter actual data once a month has passed. Has the business hit the target? Is it on track? Monitoring a business on a monthly or quarterly basis is much better than looking at a set of financials which are 9/10 months old, wouldn’t you agree?
For more information about how I can improve your business using a three-way forecast, please contact me today. Bruno Palermo, Collins SBA, 1300 265 722 or email firstname.lastname@example.org