Why is Creating a Revenue Projection good for your Company?
When securing your company’s longevity and looking into expansion opportunities, the first step is to assess your company’s current financial standpoint and what it stands to do in the future – this is called making a revenue projection.
A revenue projection is a data-backed financial forecast that gives you an accurate idea of your company’s profitability in the near and far future. By creating a revenue projection, companies know exactly where they stand and make necessary improvements and adjustments in order to attain their goals.
Surprisingly, companies often go years without creating a revenue projection as it is not seen as vital to their current operations. Be that as it may, it shows that those who do have revenue projections succeed and weather unforeseen circumstances better.
Still not convinced in making a revenue projection? Here are the advantages of having accurate revenue projections for your company:
You get a more accurate inventory
When running a company, you should be mindful of purchasing the correct volume of raw materials to keep your business operations going. Buying too much will strain your business finances in the same way that a depleting supply will affect your production. With the use of revenue projection, you can easily determine the correct number of raw materials to order.
Attracting investors is easier
One of the main reasons why companies spend time and resources in drafting revenue projections is that having one helps you to attract investors more. With accurate revenue projections, you set the expectations of your potential investors and give them objective reasons as to why they should believe in your business.
Your monitoring becomes more efficient
When your revenue projection is up to date, it is easier for you to track the performance of your company in previous years. You can use these pieces of financial information to identify key issues with your current budget plan. This way, you can further decide which strategies to drop and which ones to pursue actively.
Smarter business planning
Revenue projection is essential in drafting smart business plans. These plans revolve around the wise use of your financial resources. At the top of the list are the best practices for saving on much-needed assets and growing your revenues to prepare for possible economic setbacks.
Steadier cash flow
Accurate revenue projections dictate how you should make good use of your financial resources to make sure that your revenues are hitting the target. Without these projections, you will likely struggle with your cash flow due to miscalculations and overestimations.
When looking at the long run, revenue projections do play a major role in ensuring your company’s finances are properly managed, secured and allocated. By creating a revenue projection, you are equipping your company with the necessary tools it needs to take action and be prepared for any social or economic landscape it may face as it expands operations and secure its longevity.
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This post was first published on 7 November 2014 and edited 29 September 2023. Edited by: Aly Tagamolila