“Removing Roadblocks on Your Path to Success”


Forecasting for Success

I hope you had a great time celebrating the holidays. Now that it’s the New Year, it’s time to look at the current state of your business and yourself as a business owner. Regardless of whether your goal is to find investors or just better manage your business, financial forecasting and budgeting are essential in achieving short-term and long-term success.

As the year progresses, your operating plan and financial projections will evolve. You should be actively engaged in testing your assumptions and altering your actions as you go. Creating a financial forecast or budget allows you to determine whether you have sufficient resources to fund operations, generate personal income, grow the business, and adapt to change.

If you haven’t created a budget for you business yet it might be helpful to take a look at these recommendations here.

For those of you who have a budget in place, then financial forecasting using pro forma financial statements will help you forecast future levels of balance sheet accounts as well as profits and anticipated borrowing. Typically what your accounting team should be doing (if they aren’t already) is developing these pro forma statements in 6 or 12 month periods to forecast the next three to five years.

If your internal accounting staff haven’t had the time or ability to prepare these pro forma statements it may be time to call in some temporary outsourced help because these are pivotal in securing any sort of bank loan or financing. Whether you’re going to a bank or seeking out some funding from a venture capitalist, then pro forma financial statements will usually be required. In addition, if you are interested in doing a business valuation these reports will provide valuable information. Typically you can develop these pro forma statements by creating an income statement, a balance sheet and a cash flow budget and projections.

1. Creating a Pro Forma Income Statement – This report should help you project how much profit you’ll make in a given time period and can be prepared in these four steps.

  • Establishing your sales projections
  • Setting up your production schedule
  • Calculating your expenses
  • Determining your expected profits

2. Creating your Cash Budget – Your cash budget should be reviewed and modified as necessary on a monthly basis and is based on your sales projections from the income statement. From there you determine if there will be enough cash on hand to cover the payments and expenses required to maintain or grow your company according to plan.

3. Pro Forma Balance Sheet – Once you’ve created your income statement and your cash budget, then you can focus on your pro forma balance sheet. This report will clearly show the changes over time in assets and liabilities such as cash in the bank, new asset accumulations, loan balances and other short term or long term debt.

If you want to read more and see examples of budgeting and financial forecasting, you can check out the Keep It Simple (KISS) Strategy and 5 Simple Steps to Creating Your Cash Flow Budget and Forecast.

Additionally, beginning the first financial quarter of the year, you may be wondering if there are other ways for you to gain more financial control. In the next Marin Business Forum, Brett Martinez, President and CEO of Redwood Credit Union, will discuss the relevancy of credit unions and how they might be a good resource for your business. Click to RSVP.

Date: January 22nd at 5PM
Location: Drake’s Landing Community Room 300A. (Entrance to Jason’s Restaurant)

If you have any questions about how Pacific Crest Group can help make 2015 a success for your business, drop us a line or call us at 415-461-2586!

Until next month, we wish you the very best and much success in your business.

Note that Pacific Crest Group offers employee development, human resources, recruiting services, accounting and IT services



Closing the Books on 2013

Gaining Capital for Growth

Tax Strategies

Let the Hiring begin!

Employee Performance

The True Cost of Disengaged Employees

Does Your Company Culture Foster Innovation?

Are You Confident in Your Accounting?

2013 Newsletters

2012 Newsletters

2011 Newsletters

This newsletter is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call us if you have questions.

Copyright 2015, Pacific Crest Group, All rights reserved.