Forecasting

Estimating what will happen, and updating it when it does not.

What it means

A forecast projects future revenue, costs and cash, usually updated monthly as actuals come in.

Why it matters

A budget is set once; a forecast changes. The rolling forecast is what tells you where you will be in three months given what has actually happened.

What it looks like in practice

Keep a rolling thirteen-week cash forecast. It is the single most useful financial document a small business can maintain.

What to watch out for

Forecasting revenue from hope. Split committed, probable and possible, and know the number for each.

Where to get proper advice

Your accountant. This is exactly the kind of question they answer in ten minutes and most owners never ask.