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Why is the financial forecasting process important? How is it done?

Why is the financial forecasting process important? How is it done?

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Answer #1

A financial forecast predicts the state of your business finances. This provides the organization the opportunity to measure actual progress and anticipate potential problems before they arise. As a result, forecasting help the organization to identify, set, and hopefully meet your most important business goals.

To conduct a financial assessment of your strategic plan, take the following steps:

(a) Estimate the revenue and expenses.

(b) Perform a contribution analysis to determine if your strategies positively contribute to the bottom line.

(c ) Consolidate all your numbers in a one-year and three-year financial projection.

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