Financial Projections are the life blood of any business
What is a financial Projection?
A financial projection is an estimate of future financial outcomes for a company or project, usually applied via budgeting, capital budgeting and / or valuations. It can extend over many years and includes adjustments for inflation, expected increases in turnover, wage increases, increases in rent, and other future costs.
The difference between a budget and a financial projection
Your budget is a plan for where you want the business to go and is usually done on a year by year basis. A forecast shows where it is actually going based on what’s happened before and can stretch out over a number of years into the future.
When you first start out, there won’t be any difference between your budget and forecast. That’s because they’ll be built from the same set of estimates and assumptions. But as your business gets going, you’ll start collecting real-life information and you’ll see how sales and costs are going.
By looking at this data, you’ll get a better idea of where the business is headed and you’ll modify your predictions. When you do that, you’re reforecasting and applying projections.
Simplifying Financial Forecasting
Online accounting software makes working with a forecast easy.
KTS can upload your financial forecast to MYOB or Xero so that you can automatically compare your forecast to actuals and produce up-to-date reports, like a profit and loss or balance sheet, whenever you need them.
Once you have a financial forecast, you can then have a look at ‘what if’s’.