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How forecasting will benefit your business

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Whilst forecasting isn’t completely accurate, it can significantly assist a director look at the bigger picture and offer many benefits. Forecasts should be included as one of the main steps of a business plan. Implementing efficient forecasting tools and procedures will help to limit the use of valuable resources within the company, in conjunction with a management accounting service.

Look to the future

Forecasting can predict changes to future trends so you can change the objectives of the company to deal with the trends, and provide a sense of direction so you can implement practices to better equip the company to deal with new objectives. If forecasts predict a drop in demand, for instance, you can alter the production process so that you have less product on hand and maybe invest in a new product to reflect customers’ latest demands. This sort of forecasting involves keeping an eye on the general market, new technology, and competitors.

Improving customer service

Customers want a high quality product, and fast. If a particular product isn’t available, you risk losing that client as they move on to a competitor. Forecasts can improve stock control, work-in-progress, and availability of products. Forecasting demand can help improve customer service.

Cost of the workforce

Staff overheads are one of the biggest expenses to a company, so controlling the size of the workforce can save a lot of money. Forecasting product demand will enable a company to gauge the number of employees required. Employing too many people is a drain on resources, especially for a large or growing company.

Funding

Accurate forecasting will be required if you intend to apply for business funding. The lender or investor will want to know that they will get their money back in the future and a forecast that reflects a healthy business is more likely to secure additional funding or investment, and show you are in control. As loans are frequently an essential part of business, it will be necessary to forecast future sales and costs of raw materials, staff and other expenditure.

Controlling inventory

Inventory can have a huge impact on a company; too much stock on hand and cash flow could suffer, but too little and you may not be able to fulfil orders in a satisfactory time period. Forecasts can provide information to enable you to maintain adequate stock levels.

Forecasting has an impact on all areas of the business and should be carried out on a frequent basis. If you would like to discuss how forecasting can help improve your company’s performance, please contact us for an informal chat without any obligation, and we can demonstrate the sort of forecast tools and information we have used elsewhere.