4 Ways to Make the Best Business Financial Projections
One way to keep your business running smoothly is to make financial projections for the future. While you can’t know everything that will happen, having a general idea of your business finances can help you to stay on top of things. Here are four useful tips for making the best financial projections for your business.
- Figure Out How Much Debt You Have
When you are making financial projections, one thing to consider is the debt that your business has. Depending on other expenses, you may be able to pay off more or less of the debt at a particular time. On occasions when you are unable to pay off the full amount of your debt, you will need to take interest into account.
- Keep Track of Expenses and Income
Perhaps the most important factor in keeping track of your business finances are your expenses and income. When you are gathering this information, you should be sure to organize it into different categories instead of just adding everything together. The type of income, where it is coming from, and whether or not you have yet received the payment are all important things to keep track of. Expenses should be categorized similarly, particularly taking note of whether the expenses are fixed or variable. Having this information handy will allow you to make more accurate projections.
- Plan For Unexpected Expenses
Because you cannot plan for everything, it is a good idea to plan for the unexpected. Sometimes an expected income will fall through, or an emergency will arise. In this case, it is good to have a bit of a financial cushion. You can make an educated guess on the amount of unexpected expenses based on projections in other areas.
- Take Note of Seasonal Patterns
Whether or not your business operates seasonally, it is likely that you will find patterns in your business finances that coincide with the time of year. The longer you have been in business, the better you will be able to observe these seasonal patterns. You won’t be able to perfectly predict what will happen in the future based on past experience, but it can be a helpful factor to consider.
Sometimes you will find that your financial projections are a bit off the mark. It is impossible to truly predict the future and there will always be unforeseen circumstances, but using some of these methods, you may be able to make more accurate projections.