Ready or not, it’s time to start the process of preparing your 2016 forecast. While it may seem a bit premature, a walk down the aisle of your favorite home improvement store to check out their (already) prominently featured holiday displays tells the story. Some of this can definitely be attributed to overzealousness to capture the consumer’s holiday dollar. But it drives home the point that 2015 is winding down. It’s time to start thinking about 2016.
3 Things You Should Know About Preparing a Forecast
So what should you keep in mind when preparing your 2016 forecast? In the video below, Jim talks about 3 things you should know about preparing a forecast.
According to the video, the following 3 things are important when it comes to preparing a forecast:
Be Reasonable
If you choose to include pie-in-the-sky numbers in your forecast, then you’ll lose credibility. You won’t be able to excite your team about helping you achieve unrealistic goals. If you paint too bleak a picture, you’ll lose motivation and won’t be able to effectively drive action toward goals.
Involve as Many People as Possible
While it’s true that the responsibility of preparing the forecast usually falls squarely on the shoulders of the CFO or Controller, it’s necessary for all departments to get involved in the process to create the most realistic plan possible. Not only will you end up with better numbers, but sharing the ownership of achieving company goals spreads the burden to everyone. People are more willing to be held accountable to numbers they understand and had a hand in producing.
Make it Dynamic
Now that you have the forecast prepared, you can put it in a drawer and forget about it, right? Wrong. In order to make all the time and effort you put into preparing the forecast worthwhile, it needs to be a living document. Static forecasts are only realistic for a couple of months, at best. Dropping in actuals and adjusting future estimates based upon conditions on the ground create a much better tool for running a business than one that ceased to be relevant months ago.
Check out our article Cash Flow Projections for more info on how to prepare a forecast.
If you need help creating an accurate forecast, then download our free Goldilocks Sales Method whitepaper to project accurately.
Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan will help you manage your company before you prepare your financial statements.
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