Financial forecasting is one of the most powerful tools a small business owner has - yet it's also one of the most underused. Many business owners assume forecasting is something only large companies with finance departments do. In reality, even a simple forecast can transform how you make decisions.
At Jenkins & Co., we work with small businesses across Gloucestershire every day, and we see firsthand how a clear financial picture changes everything. Here's how to get started.
What is financial forecasting?
A financial forecast is simply a projection of your future revenues, costs, and cash position. It's not about being psychic - it's about making informed assumptions based on what you know about your business and your market.
Good forecasts are updated regularly. They're living documents, not something you create once and file away.
Why it matters for small businesses
Without a forecast, you're flying blind. You might have money in the bank today but a large tax bill or quiet trading period coming up that will cause real problems. A forecast helps you see those issues weeks or months in advance - giving you time to act.
For businesses in Gloucestershire, seasonal patterns can be significant. Whether you're in hospitality, retail, or professional services, understanding your peaks and troughs is essential.
How to build a simple forecast
Start with your revenue. Look at the last 12 months and identify patterns. Are there busy months and quiet months? Do certain clients pay late? Build these patterns into your projections.
Next, list your fixed costs - rent, salaries, subscriptions, insurance. These don't change much month to month. Then add your variable costs - materials, freelancers, marketing spend.
The difference between your projected revenue and your total costs gives you your forecast profit. Combine this with your opening cash balance and expected payment timings to get a cash flow forecast.
Tools to help
Xero has built-in cash flow forecasting tools that we use with all our clients. There are also dedicated tools like Float and Futrli that integrate directly with Xero for more detailed forecasting.
If you'd like help setting up a forecast for your business, get in touch with the team at Jenkins & Co. We're based in Cheltenham and work with businesses across Gloucestershire and beyond.