How to Assess a Revenue Forecast for Small Businesses

At the start of each month, accountants are working hard on preparing Management Accounts and bespoke commentaries for clients, which for us here at Nuvem9 gives our portfolio a clear insight into P&L and cash performance against their 2024 forecasts.

If you don’t know how to interpret a Management Accounts pack – we’re all about deciphering the accounting jargon – I felt with the current climate of revenue and cash flow concerns in small businesses, it would be an opportune time to share what a sales revenue forecast review looks like.

1. Let’s get prepared

The first step is an obvious one, but critically important, namely set and define the target.  Reflect now and ask yourself, did you and your team have a clear, unambiguous understanding of your January sales target? Whether it was revenue, units sold, or any other metric, understanding the objective is crucial for success.

Let’s get measuring

The chances of a monthly sales forecast being met reduces to zero % after the end of the month has passed. So clearly a system for measuring progress within the month is undeniably essential for staying on course. Regular monitoring allows for adjustments and course corrections if necessary. 

Take some time to reflect on how regularly you measured your performance against the target as January unfolded, and how easy and difficult it was to bring the data together.

“You can’t manage what you can’t measure.”

Peter Drucker

Let’s get communicating 

If you are dependent on your team for results, then you need to have an effective two-way communication channel open at all times to make sure they understand the company’s expectations, and that they are behaving in a way that is aligned with the common goal.

As importantly, you need to know what is happening on the ground in the market and get their first-hand feedback on successes, kickbacks and rejections. Ask yourself now how clear and transparent your communication process with staff was.

Let’s get reviewing

At this stage, the end of the month has been reached and we are helping you assess and understand how you performed against the target. Analysing performance with clear data helps identify areas of strength and areas that need improvement.

  1. For positive variances:
    1. Identify what strategies or tactics contributed to exceeding the target.
    2. Consider replicating successful approaches in future months.
    3. Acknowledge and celebrate the achievements with your team to boost morale.

  1. For negative variances:
    1. Investigate the root causes of falling short of the target.
    2. Determine corrective actions to address any shortcomings.
    3. Use the experience as a learning opportunity to refine strategies for the upcoming months.

Helping leaders and businesses drive growth

Here at Nuvem9, we do things a bit differently – we’re not your traditional accountants or CFO Partner.

We utilise our 50+ years of combined knowledge and experience, leverage technology and proven methodologies in a proactive approach to provide the best guidance and support that spans your whole business.

We work with our portfolio of clients to utilise their finances, operations, data and people to maximise their potential and build robust foundations and resilience into their business model towards stability and growth.

Get in touch for a free no-obligation chat with one of our experienced team to explore how we can support your accounting, financial planning and business strategy or find out more about our story.

Main Image Credit: By Pexels from Pixabay

Knowledge: Finance for Creative Studios

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