What Is Financial Forecasting?

Financial forecasting and budgeting are the keys to an intentional and successful financial plan. But what exactly goes into the financial forecasting methods, and how can your business best make use of limited resources to access the full financial picture? In this blog, we explore some answers to these questions and more.

What Is Meant By a Financial Forecast?

What is financial forecasting in financial management? It refers to the process of using historical data to predict market trends. The purpose of forecasting is to gather and analyze data to guide strategic decision-making. Predictions made during forecasting affect project plans, which translate into budgeting.

Financial forecasting is foundational to the financial success of projects. Without it, your team will be operating based on assumptions instead of data, which can lead to crushing inefficiencies. The good news is that you don’t have to go it alone. Milestone’s monthly accounting services and fractional CFO services can help turn your business’s financial forecasting into a competitive advantage. Contact us to learn more.  

How Do You Write a Financial Forecast?

Financial forecasting notes should include the following:

• Comparisons between historical and current financial trends
• Specific set or rolling timeline
• Considerations of Macroeconomic Financial Factors
• Best- and worst-case scenario exploration
• Cost estimations
• Connections between data analysis and organizational goals 

There’s a lot that can get in the way of completing a pro forma financial forecast checklist, but this process is critical to each project’s success. Whether your business needs to access expert partners or keep resources agile, Milestone has financial services that can help. Explore our monthly accounting services and fractional CFO services to see how your business can benefit.

What Is a Financial Forecast Example?

Typically, financial forecasts methods fall within the following examples:

• Historical Financial Forecasting: These forecasts aim to predict future growth. To do so, historical financial forecasts reference past financial statements, such as income statements, cash flow statements, and balance sheets.
• Sales Forecasting: This forecasting method aims to predict sales volume during a specific time period. Sales forecasting is an important piece of estimating ROI, which can greatly influence the budgeting process.
• Cash Flow Forecasting: These forecasts are helpful for identifying short-term financial needs. Cash flow forecasting compares estimates for revenue and expenses during a defined time period.

For financial forecasting that supports your business’s goals, trust the experts at Milestone. Give us a call to learn more.

What Are the Three Purposes of Financial Forecasts?

Three advantages of financial forecasting are:

• Clarifying Strategic Decision Making: Forecasts give more data—and context around it—to inform finance and accounting teams when creating project plans and budgets, so there’s less that will catch your team off guard.
• Optimizing Resource Allocation: Financial modeling is a key component of budgeting. When budgets are more accurate, your business can make use of a higher percentage of your resources to make an impact.
• Enhancing Financial Agility: Forecasting alerts your finance and accounting teams of upcoming challenges and opportunities.With this knowledge, you can financially prepare to adapt as necessary.

Leverage the Benefits of Financial Forecasting with Milestone

Forecasting helps your business plan a path to future financial success, and Milestone helps your team with financial forecasting. With our monthly accounting services, you can benefit from:

• Financial Review Meetings
• Financial Reports and Management Dashboard
• Financial Forecast and Real-Time Updates
• Cash Flow Forecasting

Our team is ready to help you. Give us a call to learn more.