I AM IN BUSINESS AND WANT TO DO BETTER
6. Trading, Profit and Loss Forecasting for your business.
Our trading, profit and loss forecast template is a highly-detailed spreadsheet that lets you measure the health of your business. It shows the expected revenue and expenses for your business over a certain period, and how much profit you can expect to make from a predicted level of trading. As a guide to where you are now, and to where you might be in the future, it’s invaluable.
A profit and loss forecast involves listing your planned expenses and then calculating the sales targets you must hit to attain your profit goals. You can refer to it regularly to ensure everything is going to plan. You can compare your profit and loss forecast against an actual profit and loss statement, which will help you refine future projections.
There are several significant benefits from using our trading, profit and loss forecast template. One of the biggest is that it acts as a useful risk management tool, e.g. knowing when to spend, and knowing when not to spend. A high forecast profit will give you a better idea of how much working capital you might have to work with at a certain point of time. Such a forecast might indicate the best time to invest some of that cash into your business, including things like Research & Development, or new plant. On the other side of that coin, your forecast might suggest that profit levels will be low with reduced capital to spend. In this case, a more prudent approach is required when it comes to spending.
Trading, profit and loss forecasts are only as good as the information you load into them. They can be highly accurate and extremely helpful, but they need to be realistic. There’s no point entering data based on guesswork or even desired outcomes. That will only give you a false picture and increase the risk of making poor decisions. If you’re in a well-established business, we recommend you use existing financial statements as a guide when entering numbers into your sheet. Better still, ask our advice on how to compile your forecast. The same thing applies if you are running a relatively new business. Without a history of accounts to call on, you’ll almost certainly require professional guidance.
We’ll happily help out with your profit and loss forecasting, regardless of how long you’ve been in business. With our help, in conjunction with the template, you’ll be able to make smarter decisions based on highly accurate projections.