Part 1 - How are you tracking?

Based on a financial year starting on the 1st of April, the 30th of September means you're six months into your financial year. This is a good time to look at your budget and consider a reforecasting to reset what your business will do for the next six months. It is a good time to check how your business is tracking relative to your goals and reset what you need to do for the next six months.

How to forecast:

1. Compare budget and actual for April to September. Look at the key financial statements listed below and compare your actual performance with your budget performance, highlighting the variances.

   • profit and loss  

   • balance sheet

   • cash flow

2. Review your actions and targets that you had agreed in the annual plan for the year.

3. Break down all your operational progress against the actions in the budgets; a number of examples are listed below.

   • production targets

   • productivity measures – how busy your staff are

   • sales targets and mix – who did you expect to sell to

•  This is a review of where you wanted to be and where are you really are – what is your gap?

• This could be positive or negative.

During this 2020 year a number of people created what we called a survival budget – this is the minimum activity that the business could do to survive, in what was turning out to be a challenging year. This was basically the worst case scenario and this allowed the business to make decisions around important matters  – for example staffing, restructuring, closing premises and reducing outgoings to ensure survivability. Because the business was reviewing this activity as part of the budget, these decisions could be implemented earlier in the financial year.

This forecast process is time to check how these are tracking and to compare the overall activity to the annual planning process and where you thought your business would be six months into the 2020 financial year.

Obviously, if you went into the year with a survival budget, the best outcome is that you are in a more favorable position than expected. Hence the forecast can now be based on the actual activity under the conditions of COVID-19 with, for example, better sales and better controlled expenses.

Now remember for any budget or forecast: sales are forecast and expenses are a budget.

• What does this mean:  you can control your expenses (as you make the decision to spend of your expenses) but you can only influence your sales. This is because somebody else i.e. your customer/client makes the decision to spend with you, you can only influence their decision through your point of difference (i.e. price, quality, service).

The next blog will explain how to forecast – start with getting all the information together and review progress. Additionally, create a SWOT:  what are your strengths, weaknesses, opportunities and threats for the balance of the year.