From the smallest home business to corporate giants like Nestle, smart forecasting pays off big time. When you have up to date information and accurate projections for the future, you can make smarter, more informed business decisions.
This means you can be prepared to take advantage of every opportunity that comes your way. And, in a competitive market where half of small businesses don’t make it to their fifth year, you need every advantage you can get.
But what exactly is smart forecasting, and how can it help you run more business more efficiently and effectively? In this article, we’ll break it all down. So read on to find out why your business needs smart forecasting.
What is Smart Forecasting?
When you think “forecasting,” your first thought might be how the weather report is never accurate. The good news is your business and the market are more predictable than the weather!
Smart forecasting is taking historic data and using it to make reasonable predictions about the future. Forecasts generally deal with periods in the nearer future. The further in the future you try to predict, the more likely it is that the market conditions will change, and you’ll end up off the mark.
That said, forecasts deal in probabilities, not absolute fact. They are a best guess based on a strong methodology and good data. Forecasting identifies a range of possibilities, as well as assessments about the likelihood of each.
Any uncertainties are flagged, and risks calculated, so you can plan for the unexpected. Plus, you can constantly get reports to make sure your decisions are playing out as planned. If not, you can adjust your strategy.
Smart forecasting doesn’t provide certainty. However, it gives you the tools to act intelligently within uncertainty. It helps you take advantage of all the opportunities within uncertainty.
How is it Different than a Budget?
With budgeting, you also use past data as well as information about your current finances to plan for the future. You generally set budgets yearly, and have some check-in points throughout the year to make sure that you are on track.
Smart forecasting, on the other hand, is all about looking at the present. It is a sort of real-time update to your budget progress. It helps you ensure that you stay on track of your budget and respond more quickly to your business’ changing needs.
For example, you may be picking up more work and generating more revenue than you anticipated in your budget. With forecasting, you could see this and decide if you need to take on more staff to fulfill this demand and keep growing.
Additionally, a good forecast takes other factors into account that aren’t normally included in a budget. Changes in the economy or stock market can affect your forecast. So can major events, news articles or trending subjects.
If you had a toy store, for example, and you noticed the fidget spinner craze just beginning to take hold, your forecast would help you decide how to act. You might be able to assume that since sales will increase, you can spend a bit more to increase your stock beforehand.
Basically, a forecast is different from a budget because it gives you current information, helps you make decisions in the present and takes trends and current events into account.
Understanding the Methodology Helps You Make Decisions
A good smart forecasting program won’t just give you projections. It will help you understand those projections, and how to make strategic decisions from them.
There are different models and methodologies used to generate forecasts. One software might use a different method than another, and come to different results.
When you understand how the software is generating the report and what sorts of things it is taking into account, you can be more confident making decisions.
Easy to Run Reports
One of the best parts of smart forecasting is how easy it is to generate the reports. Once you have your software set up, you can automatically run reports.
Accurate and useful projections are available with just a few clicks.
This means you can take advantage of projections as often as you would like. You don’t have to worry about wasting your precious time fiddling with numbers and complex risk assessments.
Smart forecasting software takes care of the gritty details, leaving you with actionable projections.
Get Alerts To Stay On Track
Like we said before, forecasting gives you up to date information. The reports can be run automatically, and you can get insight anytime you want.
Constant automated updates give you another level of security to make sure you stay on track. You can get smart alerts that give you a warning whenever things look like they aren’t going according to plan.
This means that you can respond to the unexpected instantly, and you can get ahead of potential issues before they become a real problems.
It also means that you can take advantage of any potential opportunities. You can respond instantly to changes that give your company a boost, helping grow your business even more.
Analyze Your Business
When you use a smart forecasting software, you can get a breakdown of your business’s performance. This can help you plan, streamline and improve your business.
You can see what areas you are doing well in, and which areas might need some extra work or investment. Since all businesses have limited resources, forecasting software, allows you to allocate these resources most effectively.
You can make sure that when you are allocating time, money and manpower, you are improving the aspects of your business that need the most help. You’ll also be sure that you can make these reallocations without undermining the most successful areas of your business.
Or, you can decide to move away from some less successful ventures, and further develop the most profitable areas. The possibilities are endless. Smart forecasting helps you see these possibilities, and take advantage of them.
Smart Inventory Management
How do you know the best times to re-order inventory? With smart forecasting, you can compare the probable demand with the cost of storing unused inventory.
This way, you can make more accurate decisions about the inventory you will need. It will help ensure you won’t have too much on hand, but you won’t run out either.
Smart inventory management saves on costs. It also helps avoid shortages, which can be catastrophic for your business. If you don’t have the product your customers need, they will go to your competitors.
Great forecasting can help you make sure this doesn’t happen.
Strengthen Your Budgeting
Great forecasting can help you with your budgeting, and vice versa. At its most basic, a budget is all about making sure you have the money you need for everything important to your business.
No matter how great your forecast is, it shouldn’t be a replacement for budgeting. Instead, you can use the information you’ve gained from a year full of forecasting to inform your budget.
Then, as you go throughout your year, your forecasts will be informed by your budget. This will help make sure that while you try to take advantage of opportunities and challenges as they arise, you will never make an error you can’t afford.
When you use your forecasts and budget to support each other, you can feel confident in taking calculated risks.
Get Access to Other Business Tools
With ScaleFactor, the program comes loaded with a ton of other essential tools besides forecasting. You will be able to handle the bulk of your accounting and finance management with this software alone.
The software has tools for bookkeeping, invoices, bill pay and compliance. The great thing about having all these tools connected in one software is that everything is integrated and compatible.
All of your accounting data is connected to the forecasting software. This means you only have to input information or make changes once for it to show up in all your reports. With everything tied together, there is less room for errors.
Interested in seeing how all these products work together? Request a demo to see how you can use forecasting and all these other tools to manage your business.
Smart forecasting can help you make more informed business decisions. By getting real time, up to date information, you can make timely decisions. You can take advantage of opportunities and respond to problems as they arise.
While they don’t predict the future, the information about the range of possibilities and probabilities is essential for taking calculated risks. Plus, forecasting can help you with everything from inventory management to budgeting, to analytics.
Do you want to learn more about smart forecasting and how ScaleFactor software can help with your finance management? Contact us today.