Understanding the Basics of Revenue Projection in the UK

With a diverse and booming economy, the UK has approximately around 5.6 billion active businesses as of 2023, making it a social market that any company can enter.  

However, setting up your own company and making sure that it sustains operations and grows is a different thing. Sometimes, a company’s lifespan is shortlived and owners have to close up shop quicker than the time it took to actually bring their business to life. 

Read: How to Create a Revenue and Growth Forecast for your Company   

Why is that? Unfortunately, a big factor in high business exit rates lies in the lack of back-end prioritization. Most focus on front-end operations such as inventory, day-to-day logistics and sales management that they forget that before prioritizing any of this, companies should focus first on the foundation of the companies: the legalities, the paperwork and the projections. 

Having said this, we know that it is quite a task to create a revenue projection to base all your planning and forecasting on, so we’re here to lay down the basics for you.  

What is a Revenue Projection in the UK?  

For companies, revenue projection is important as it bridges the gap between the bills that need to be settled and the cash inflows or the money coming into the company. Along with this, a realistic revenue projection also allows for better management of company cashflow, identifying trends and potential bottlenecks and improving the budget. 

Preparing the forecast 

Working on your forecast is very important for your company- that is already a given. But how, exactly, can you start your forecast? For those that are keen on taking charge of their own forecasts, it is necessary to start rounding up some of your most critical numbers. These include: 

• income and expenditure; 

• cashflow statement; and 

• balance sheet. 

Income and Expenditure 

Income and expenditure typically include your critical business numbers in the form of actual sales, cost of production and overhead costs. Getting your cashflow statement in order is also vital - keeping a copy of receipts, invoices, capital expenditure, loan repayments and the like is the best way to do this. 

Cashflow Statement 

Some companies who do not yet have a strong grasp of advanced accounting skills, particularly in forecasting, may skip reviewing the balance sheet. But if you want a more accurate projection, you should include this in your calculations. The balance sheet basically allows you to look into your cash inflows for the purpose of keeping your fixed and current assets in order. 

Revenue Forecasting 

Revenue forecasting can save your business from a lot of financial hurdles - that is an understatement. If, for some reason, you decide to do away with revenue projection, it would be difficult for your business to prove and assert its financial viability. And this would ultimately affect your business finances. 

Being able to prepare an accurate revenue projection report allows your company to make decisions based on data and lower the risk of new ventures and initiatives. Adopting a data-driven growth mindset will help your company navigate the different landscapes and markets you will have to endure if you want your end goal to be success. 

Read Next: Why is Creating a Revenue Projection good for your Company?  

Need help in Managing your Finances? 

If you feel that you need more assistance in getting your finances in order, this is where we come in! With our trained experts, we can help you take the next step in managing your finances and plan for the success and longevity of your company.  

You can also grab a copy of our whitepaper Outsourcing: How to Make it Work to learn how we can make outsourcing engagement work for your growing business.   

This post was first published on 26 November 2015 and edited 05 April 2024. Edited by: Aly Tagamolila