Question

What is the purpose of financial forecasting and how would you use proformas to make your small business more successful? Provide details and at least two examples in your response.

Answer 1

Financial forecasting helps an organization to establish their budget and future requirements by understanding the business needs and overall operational needs. This also reduces the contingency level to a great extent by properly anticipating the requirements. This also provide seamless cash flow and project opportunities for investment . The financial forecasting provide more control over the financial requirements and also give better transparency and also able to control and manage the budget more precisely.

Considering exams of an organization where the investment decision is still pending. The forecast financial analysis helps in providing enough confidence in taking a decision properly on the same. Another example which helps an organization in accurate financial forecasting is deciding the market expansion plans. For that the organization requires steady cash flow which can be determined only through understanding the future needs which is estimated through forecasting.