Blog

Creating a Financial Forecast: A Step-by-Step Guide for Businesses


Uncertainty is standard in businesses of all sectors. Some things just aren't within our control and can have a strong influence on the market. For instance, the advent of new technologies, like AI, constantly changes business operations across nearly every industry at the base level. For a business to weather the storms of change, it’ll need to be in front of innovation and be prepared financially for whatever the solution may entail. This is where financial forecasting can help businesses estimate sales and profit to make more informed decisions. One of the key skills to know or even outsource is how to create a financial forecast and more importantly, how to implement it. In this article, we’ll go through the step-by-step procedure of creating a financial forecast for businesses small and large.

Defining the Purpose or Intent of a Financial Forecast

The first step of creating a financial forecast should have questions like:

     What does the business learn from forecasting?

     Does the business hope to estimate the number of units of products or services to sell?

     How will the existing budget shape the future of the company?

Defining the purpose or intent of the financial forecast is paramount to determine the factors and metrics of executing it.

Gathering Past Financial Statements and Data

One of the aspects of financial forecasting includes evaluating and assessing past financial statements. So, it is vital to acquire all the relevant historical records and data, including:

     Total revenue

     Profits

     Losses

     Investments

     Equities

     Liabilities

     Expenditures

     Earnings per share