Understanding and Developing Financial Projections in 4 Simple Steps -Written by: Ed Carter of ablefutures.org

The world of sales and marketing is changing everyday – it's time to get your business reignited and take it to the edge! Connect with Take it to the Edge Marketing today to find out how! 520.904.8258

​Financial projections are the foundation of a sound money management plan. Accurate and realistic predictions can help set your business up for success, allowing it to operate within its means and reap the benefits. Check out these tips from Take it to the Edge Marketing on financial projections and how to implement them in your business.
 
1. Understand What Financial Projections Do
 
At the outset, financial projections might sound like random guesses about the future state of your business that have little impact on the actuality of your situation. In reality, financial projections allow you to utilize the funds you have and plan to have effectively, without overextending yourself.
 
This is why you need to find accounting software that works for your company. The right accounting software should provide insights and data on cash flow and your most current profit and loss and balance sheet reports, which is all needed to make accurate projections. But it goes beyond P&L reports: An accounting system ideally should be robust enough to handle all aspects of the financial side of your business, including invoicing, time tracking, and inventory management. 
 
2. Use Projections To Pay Taxes Correctly
 
H&R Block notes that part of owning a business is paying taxes, and accurate financial projections can help you stay on track by giving you an idea of how much you’ll owe when the end of the year comes. In most cases, the state you operate your business in will require you to pay taxes and/or file annual reports to stay compliant. If you don’t fulfill these requirements, your state may impose hefty fees or penalties, and in some cases, a company’s right to conduct business may be revoked.
 
3. Determine Accurate Projections
 
To make the most accurate overall projections for your business's financial future, you need to first work out the smaller pieces that make up those projections. Anaplan explains that sales projections are predictions of what you can expect your business to bring in in sales over the next period. Use historical data to help shape realistic expectations of future performance. Take into account outside factors such as industry trends and the overall health of the economy. 
 
Just as you need to have an idea of what money will be coming in, you also need to know how much money will be going out. Luckily, your business expenses are generally easier to determine, as they often remain the same from period to period. 
 
Finally, you'll need your company's balance sheet. This document displays your company's total assets, liabilities and shareholders' equity. In essence, it is the overall financial standing of your business. 
 
Using your sales and expense projections along with your balance sheet, you should be able to make accurate projections about your business's future performance. Though it's tempting to be optimistic when predicting your company's future outcomes, don't allow yourself to be anything but realistic when crafting these projections. It is far better to plan for the worst and be pleasantly surprised than to stake your financial future on hope and your business being forced to close when those projections fail to come to fruition. 
 
4. Don’t Be Afraid To Go Back to School
 
As an adult business owner, the prospect of returning to school may be a little daunting. The effort put forth today, though, can have your business reaping the benefits for a lifetime. Business practices are ever-evolving, and it pays to prepare yourself with intimate knowledge of all the aspects that make up running a company. 
 
UpGrad recommends pursuing an MBA to improve your business's outcomes and gain a greater understanding of entrepreneurship. Through your MBA education, you can learn to develop your financial skills, advancing your knowledge of accounting, balance sheets and payroll. You can also make invaluable connections within the business community that can give you support and guidance as an entrepreneur.
 
Use the data and tools available to you to make realistic and accurate projections for your business. With solid predictions helping to inform your management decisions, you can build a better future for your business and yourself.