3 Ways for Small Business Owners To Make and Use Better Financial Projections

Newer small business owners often struggle to make realistic financial projections for the coming weeks, months, and years. Financial projections are crucial to building a strong business long-term: If you can’t reasonably predict where your business will be monetarily by the end of the year, you’ll have no idea how to allocate your budget, when to hire the right employees or freelancers, or where to acquire additional funding.

Think of creating financial projections as a part of budgeting for the future of your enterprise. You’re estimating the amount of money coming in and the amount going into the necessary components of running your company such as employee salaries, taxes, insurance, and inventory. Consider the following suggestions from Build A Wealth System to help you make better financial projections as you run your company.

1. Find Trends Within Your Budget

Business budgets may look great on paper while doing a poor job for your company in reality. If you’ve been up and running for the past three to five years, you should be able to look at your documents, budgets, and statements to determine how much money you’re spending and making. Do your projections show an upward trend, or are you taking a loss each year?

Include quarterly financial statements, year-end tax statements, and invoices from past customers to gain a sense of where your money is flowing. For example, you may be gaining a lot of new customers, but you also may be spending a good deal of your budget on a rental space, taxes, or freelancers that you can do without. For example, you may not need a full-time social media specialist as well as a staff content writer. Perhaps one person could do both tasks.

If you discover or project a budget shortfall, it may be wise to seek a business loan. Before doing so, be sure to examine your credit report from the four major credit bureaus. This will reveal any potential issues you’ll need to resolve before seeking a loan.

2. Update Your Software

It’s going to be nearly impossible to do this work efficiently by hand or on a standard computer program. That’s why you definitely need to invest in the best tools out there, including your accounting software. Remember, accurate financial projections can save you a great deal of time and help you plan for the future. Using financial software will also help you understand how many taxes you need to pay at the end of the year. Many states require annual reports that allow your business to remain in good standing—and failing to file accurately or on time can have serious consequences.

Enroll in an Online Program Alongside Your Work

If you find that your financial projections are failing to estimate your business’s reality, consider enrolling in an online program to sharpen your accounting and financial skills. Build a stronger business by earning an MBA or a degree in finance.

If you’re concerned about work-life balance, find an online degree in which you still have time for your work and family responsibilities in addition to your classes. In this type of program, you can strengthen your accounting skills and learn how to make better balance sheets and more accurate financial projections.

Whether you’re trying to plan with more efficiency, attract investors, or simply save your budget from bankruptcy, learning how to devise better financial projections is crucial for running a healthy small business. Follow the three tips above and don’t be afraid to reach out for help if you feel that your business needs additional assistance.


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