Your business missed its Q1 forecast. It’s not too late to get back on track
As long as business continues as usual, anticipating the future is relatively straightforward. However, your budget can quickly take a hit when you run into persistent staffing issues, product launch delays, or even a pandemic. At RVR, we’ve worked to help many business owners who have ‘been there, done that.’
Strategic forecasting and budgeting provide a roadmap for businesses to maintain stability and achieve growth. When significant changes occur, it is important for companies to modify their forecasts to remain accurate. This is especially relevant this year in light of continued inflation.
As a result, maybe your forecast or budget didn’t quite match your projections in the first quarter. If this is the case, there’s still time to adjust. While a missed forecast deserves attention, it’s not necessarily an indication of trouble to come. For your business, a missed forecast might be positive. Your sales could have been higher than expected. Regardless, understanding the reason behind the missed forecast is crucial to getting on track again. At RVR, we help numerous clients readjust their projections to stay on target for the remainder of the year.
In this blog, we’ll discuss the importance of keeping an accurate forecast, analyzing metrics routinely, and adjusting them as necessary. We’ll also cover how RVR helps clients use accurate data to improve their metrics and stay prepared to reforecast in the future.
The impact of missing your forecast
Budgeting and forecasting work in tandem and are often misinterpreted as being the same. Budgeting establishes a baseline for comparing actual results with expectations. Meanwhile, forecasting serves as a guide for financial planning and determines whether the budget will meet its target.
While most budgets are designed for an entire year, companies should regularly revisit their forecasts. With an up-to-date forecast, leaders can get a full picture and make well-informed decisions.
Missing a forecast, whether it is over or under, has consequences. Understanding the reasons behind a missed forecast is essential to correcting the course. Is your company underperforming in sales, and if so, which target markets? Was it a single client? Have any new expenses been missed? Your business may have flat revenue but you’re seeing lower operating expenses due to unfilled staff positions and you’re overperforming profitability targets. This means you have real trouble on the horizon. At RVR, we can help clients get to the bottom of what was missed, understand why it was missed, and if it can be sustained.
The reforecasting process allows businesses to adjust to any unexpected changes. As part of this process, it’s essential that you measure your company’s progress against its original budget in order to understand why your forecast was off. This could reveal that you are making the wrong assumptions when you’re creating the budget.
We help clients gain a complete picture of their accounting and finance concerns. We offer expertise in cash flow analysis, budgeting, and forecasting, as well as accounting cleanup and bookkeeping. Additionally, our team assists business owners develop the skills and knowledge they need to mitigate challenges, unlock organizational potential, and boost performance.
It’s time to reforecast
A company’s forecast needs to be built on the basis of accurate data collection, storage, and analysis. With a wide variety of data available to companies, the process can become more challenging. A forecast is driven by both financial and operational numbers, and both should be considered during the process.
At RVR, we assist our clients in determining what caused their business to miss its first-quarter goals and plan for a successful future. We review each department’s activities and its progress, as well as the impact it has on the company’s financial performance. We help clients understand the story behind their metrics and put valuable insights into context.
It’s possible a company’s forecast was off because they lost clients during the first quarter. Perhaps they were impacted by supply chain issues that led to missed productions. Maybe they couldn’t find the right people for the job or had problems with automation.
It’s important to evaluate whether missed forecasts are a pattern or a trend. There might be other reasons behind an off forecast that leaders have not yet considered. Maybe you just hired dozens of new employees to accelerate your growth objectives. As a result, you’ll incur higher costs and reduced profitability because you invested in people. Over the next six months, you should start to see a substantial increase in production if your employees are effective.
Reforecast as you move through the year
Every company’s forecasting process will be different depending on the industry, feedback, and the forecast’s purpose. According to a recent McKinsey report, while many CFOs were pleased with the results of their forecasting efforts, about 40% also said that their forecasts were not entirely accurate. They also said that the process took too long.
Forecasts should be built with updating in mind, taking into account trends and focusing on operational information, such as sales pipelines, cost of goods sold (COGS) estimates and staff costs. It’s not enough to review a forecast when unexpected changes occur. Over the course of the year, leaders should measure their company’s performance based on their budget and adjust their forecasts accordingly.
Companies must have enough detail in order to adjust properly. There are a few facets of an effective forecast that company leaders must routinely pay attention to, including a dashboard that displays a rolling view of cash. It is also important to look at the weekly revenue, activity and gross profit numbers. We help clients understand the importance of checking the insights weekly and throughout each quarter, so they can make necessary changes in a timely manner.
At RVR, we work with clients to develop and implement an efficient and comprehensive forecasting process that is easily updatable and provides insights to make informed decisions. This will minimize interruptions to daily business, drive accountability, and position their company to continue pursuing its growth objectives.
By: Frank Fontneau, Partner of RVR Consulting Group
RVR Consulting Group provides your company with resources to support your vision and generate faster returns. By operating from both a strategic and tactical position, we protect clients during critical periods of uncertainty. Our services include advising, talent acquisition, sourcing fractional employees, exit planning, and selling your business. Regardless of your challenges, our firm’s experience is structured to make the road to your objectives faster, simpler, and more profitable. Our goal is simple: help you maximize the value of your business.
We are motivated to foster growth and develop opportunities for companies and their internal staff. Those economic impacts transcend into communities when our clients succeed and have invaluable, lasting effects.
For more information, visit https://rvrteam.com/contact/ or email email@example.com to schedule a no-obligation discovery call.