Foresee what’s possible
If you had a financial crystal ball, then making business decisions would become exponentially easier. We can’t say you’d never misstep again, but at least you’d do it knowing all your options.
Get your cash-flow forecast
Now that you know what a cash-flow statement is, you can appreciate the cash-flow forecast. This report is exactly what it sounds like: It’s a look at what your cash flow will be in three, six, or twelve months based on the choices you make today.
We highly recommend you conduct this exercise multiple times throughout each year.
Of small businesses that perform cash-flow forecasts annually, only 36% succeed. That figure jumps to 80% for the companies who forecast their cash flow each month.
Where do you get such a helpful projection? Grab a free cash-flow forecasting tool from Ignite Spot. It’s a mechanism that other accountants charge $500-$5,000 for, because it combines the expertise of a finance professional with the real numbers from your business.
Once you see your financial future, here are some business decisions you can (intelligently) make:
Mapping your numbers and potential choices into the future is the perfect way to make the best business decisions.
From now on, base all business decisions on the whole picture
By now, you can see the importance of using a financial compass to plot your course. The effective use of financial statements has been shown to increase business viability. Futurist Stowe Boyd even calls uninformed decision-makers decision-fakers.
We’ll leave you with one word of warning: Now that you have seen how much financial data is available, resist the temptation to fixate on one metric or another. Watch them all in tandem.
In his co-authored book The Balanced Scorecard, Harvard Business School professor emeritus of accounting Robert S. Kaplan tells a funny story to illustrate this point. He tells readers to imagine a plane cockpit with only one instrument. Would you board the plane after exchanging these words with the pilot?
Q: I’m surprised to see you operating the plane with only a single instrument. What does it measure?
A: Airspeed, I’m really working on airspeed this flight.
Q: That’s good. Airspeed certainly seems important. But what about altitude? Wouldn’t an altimeter be helpful?
A: I worked on altitude for the last few flights and I’ve gotten pretty good on altitude. Now I have to concentrate on proper airspeed.
Q: But I notice you don’t even have a fuel gauge. Wouldn’t that be useful?
A: Fuel is important, but I can’t concentrate on doing too many things well at the same time. So, this flight I want all my attention focused on airspeed. Once I get to be excellent at airspeed, as well as altitude, I intend to concentrate on fuel consumption on the next set of flights.
(Probably no one would choose to be a passenger on this plane.)
Be sure you keep a watchful eye on all your data, now that you know your way around your whole financial dashboard. Changing your visibility like this doesn’t just help you make a few good course corrections — it changes you as a leader. For the first time, you’ll be a truly successful decision-maker. Start making better decisions today by contacting the business finance experts at Ignite Spot. We’d love to chat with you for 30 minutes to improve your financial visibility.