Accounting software, especially aimed at startups and SMEs has moved forward in leaps and bounds in recent years but very few include specific forecasting functionality which allows you to manage things like future cash flow effectively.
As a result we are often asked why people should use both forecasting software and accounting software, so we thought we’d jot down the top 5 reasons why it is essential to use both in a successful business.
1. Proactive, not reactive
The biggest difference between accounting and forecasting software is that accounting tools allow you to retrospectively analyse the financial performance of your business. Whereas forecasting software allows you to proactively look into the future of your business and see what could happen.
All successful businesses analyse what has happened previously to learn from it and forecast the future to successfully navigate to their target objectives.
2. Cash flow forecasting
Everyone knows that cash flow is the lifeline of any business – without a positive cash flow, very few will be able to survive for long.
Therefore, it is essential that you can forecast the future of your cash flow and see what will happen to it if you choose to change any of the many variables that has a direct impact on your cash flow.
We have written extensively on the importance of cash flow forecasting but it is just as important to understand how to calculate your cash flow so you can understand the impact any changes may have on it.
3. Prevention is cheaper than cure
There is always an element of risk when running a business but wouldn’t it be great if you could reduce that risk as much as possible. This is what forecasting does, and what accounting software doesn’t do. Accounting tools are designed to help you run your business on a day-to-day basis but not to grow it or to manage it moving forward.
FINANSCAPES financial forecasting software shows you what will happen in the future if you continue with your current inputs and outputs at the same rate. It will show you;
- if your cash flow is in danger,
- what your break-even point is for each product line at its current sales rate and
- what would happen if you changed any of your financial variables.
This information will then allow you to quickly identify any potential problems and put remedial measures in place now to avoid future hiccups.
For £35.99 for a 12 month license, FINANSCAPES forecasting software could save your from severe financial risk – try if FREE today.
4. Better decision making
More than avoiding financial heartache with remedial measures, you will be able to make quicker decisions about the future of your business with forecasting software because you will have confidence in the outcome and impact on your finances.
This level of faith in your decision making is not something you will get from looking at previous financial performance figures provided by your accounting software.
5. Allows for planning and growth
As accounting tools only show you what has happened in the past, it is difficult to see from that data, what growth and performance you can expect from the future. You don’t want to stand still so setting targets for the future will help you to ensure you are moving forward.
But what should those targets be and what impact will those targets have on your profit, cash flow and margins? All of these questions, and many more, can be answered with regularly maintained financial forecasting software such as FINANSCAPES.
There are many things to consider when looking at potential growth strategies but it would be much easier to see which strategy is right for your business if you could forecast the different scenarios and compare like for like outcomes. This is exactly what FINANSCAPES forecasting software has been designed to do with its clear graphical dashboard and performance indicators.
Summary
It is important to understand that accounting and forecasting software perform different roles and having both is the best way of achieving growth and success.
Learn from the past, plan for the future.
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