Standard financial statements are much like a rear-view mirror. They are essential to look into to properly see what’s behind you.
They tell you what happened last month, last quarter, last year. While it’s all good information, it’s not nearly enough. You want to know what’s going to happen (or at least what’s likely to happen) in the future. With this in mind, you can make better decisions – both financial and strategic.
If you’re only looking at your standard financial statements (income statement, balance sheet, statement of cash flows, etc.), you’re not alone. Most business owners focus exclusively on these reports. While you can get some future insight from the aforementioned standard financial reports, there are ways that are vastly more effective.
Financial forecasting can take into account both future events and changes that might not be obvious from your standard financial statements. Examples of this include new business, projects that are ending, changes in expenses due to increases, one time or infrequent expenses, or the costs associated with growth.
Unfortunately, forecasting is not as easy as pressing the “print button” and viewing reports in your accounting system. It takes work, knowledge or a tool like GrowthCast to help. However, if you do take the time (or use a tool), you likely won’t go back. You’ll have a much more detailed and accurate picture of your future than you’d get by just extrapolating the results in your that “rear-view mirror” known as your financial statements. Try it; we’d love to hear about your experience.