Importance/Advantages of an effective financial forecast:
- · Demonstrates the financial viability of a new business venture. Allowing you to construct a model of how your business might perform financially if certain strategies, events and plans are carried out
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- · Allows you to measure the actual financial operation of the business against the forecast financial plan and make adjustments where necessary
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- · Allows you to guide your business in the right direction and take control of your cash flow
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- · Provides a benchmark against which to measure future performance
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- · Identifies potential risks and cash shortfalls to keep the business out of financial trouble
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- · Provides an estimate of future cash needs and whether additional private equity or borrowing is necessary
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- · Assists you to secure a bank loan or other funding, lenders and investors require financial forecasts to show your capacity to repay the loan
