Profitability Forecasting

Preparing for changes in profit and cashflow

Without regular profit and loss forecasting and cash flow forecasting, a business is at the mercy of the business environment, reacting to changes rather than being prepared for them. In addition, profitability forecasting allows management to implement programmes to restructure the business sooner, maximising returns and ensuring change can be managed effectively, rather than firefighting.

Profitability forecasting provides the first stage input to the management accounts, setting budgets and targets for staff and management alike so that the business can navigate effectively through the opportunities and threats that present themselves throughout the life of a business. This includes accurate sales forecasts and turnover and cost planning to estimate expected sales, gross profit, and expected operating profit.

What we take into account

It is worth bearing in mind that a well-run business, with sound sales planning and a clear profit forecast, is much better received at the bank when additional funding is required for expansion or to cope with a downturn. Demonstrating the company’s economic viability through calculated net income and expected profit figures convinces investors of the business’s financial viability. Incorporating market research, historical data, and an understanding of market trends and customer demand into forecasting ensures an accurate forecast that helps allocate resources effectively and identify trends in financial performance.

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