A good entrepreneur has a natural flair for making strategic business decisions. But to make the most of your keen talent in business management, a successful SME owner and his financial service provider also need access to the right set of business financial tools. Through these tools, you can easily strategise the wise use of your business capital, paving way for better financial accounting and business performance. To that end, learning the ropes to SME financial statements and revenue projection initiatives are indispensable.
As expected, startup businesses may struggle with the task of projecting their expected revenues, especially since forecasting functions require technical expertise in financial accounting. But before you decide to do away with revenue projection, weigh the consequences. While revenue forecasting will take a lot of time, it is only through a financial forecast that you can convince investors to put money in your business. To get on track, take small steps toward revenue projection. Here are some of the things you can start with:
Be mindful of your expenses.
Forecasting is all about planning, and as a startup SME, the easiest map out are your expenses. Create a comprehensive list of all your business expenses such as fixed costs of overhead costs, followed by the cost of goods sold. Putting up this master list will help you identify the best way to manage your cash inflows or the money coming into your business through retail sales.
Here’s an extra tip: Upon calculating your business expenses, be extra careful of doing estimates. The safe course is to double your estimates, just to be sure you won’t be left with serious budget deficit issues in the long run.
Choose both conservative and aggressive.
As a business owner, you must understand that there is no single way to forecast your revenues. As such, you need to find the perfect balance between a conservative case or the practice of overstating your financial performance; and an aggressive case, which is the exact opposite. Balancing these two will help keep you motivated even while you’re constantly doing a reality check.
Set correct ratios.
Finally, you can cap off your revenue projection initiatives by resorting to the simplest way to do forecasting: check your key ratios. Key ratios accurately depicts the current financial status of your company. Hence, looking through your key ratios and making sure that it’s at par with your current business model will help ensure that your projections are sound.
Establishing an accurate set of growth projections for your SME is not a walk in the park. But the outcomes of getting it done correctly and using it to your full advantage could spell the difference between the success and failure of your enterprise.
Make the most of what revenue forecasting has to offer. For more advanced finance and accounting solutions for your SME, get in touch with our qualified advisers at D&V Philippines.