Financial forecasting is the process of looking at your business's financial history to predict where your finances will be in the future. This is based on your current growth and losses and your anticipated growth and losses. An accounting firm can look at all of your financial information to put together a reasonable forecast of where your business is going. But, if you have never had financial forecasting done before, you may wonder why you would want to have it done. Here are a few reasons why you may want to hire an accounting firm to complete financial forecasting for your business.
May Be Necessary if You Are Taking Out a Loan
If you are looking to take out a business loan, financial forecasting may be needed. A bank or lending institution understands that you may need the money to help your business expand operations or grow. But they want to ensure that they are making a sound investment that will help them get their money back in the future. An accounting firm can complete financial forecasting, which will show a lender where your business is at now and how the money they are lending you can help expand your business. It will also show what your projected numbers will be in the future, giving a lender peace of mind that you will have the money to pay off the loan.
Can Help You See What Parts of Your Business are Profitable
Another reason why you may want to hire an accounting firm to complete financial forecasting for your business is so you can see what parts of your business are profitable. Financial forecasting can look at your business as a whole or in different parts. One part of your business may not be profitable and may be dragging your entire business down. Financial forecasting can look at this, help forecast where that part of the business will be in a few years, and help you determine whether or not to drop that part of the business.
Can Help You Sell Your Business
Lastly, financial forecasting may be done if you are looking to sell your business. If you have built a business, you want to get a fair and reasonable amount of money for it. Likewise, the buyer wants to make a smart investment. A financial forecast can help both of you see what the current value of the business is and where the business will be in a year, five years and/or ten years. This helps you to price the business and helps a buyer see the value in what they are investing in.
There are a number of reasons why financial forecasting may be done. If you need to estimate what your profits will be in the future, either to take out a loan, sell the business, acquire a new business or to simply ensure you are running a profitable, long-lasting business, an account firm can help you with this task.