Forecast Your Income for 2014

crystal-ballNews Flash: In three months the year will be over. That might seem like a long time, but as the business year draws to a close, the days and weeks have a habit of speeding up.

Creating an income forecast for the coming year is an excellent step in the right direction. An income forecast not only shows you what to expect, but will enable you to save money and budget appropriately. In addition, a forecast provides you and your team with a real number – and when goals are written down they become more tangible.

The income forecast needs to be balanced – it should include figures from previous years’ financial statements, and take into consideration such factors as growth, additional expenses, and depending upon your market and industry, attainable goals.

So what exactly should you be using as guides for your income forecast? Begin by checking your past financial history to determine an average income. Research your industry to determine where it is going. Discuss the forecast with your department heads and managers to collect their insights. Above all, be realistic!

Here some other factors to consider:

  • Create a sales projection – this needs to take into effect past performance, market growth, and projections that are based in reality. Remember, growth can remain as it was last year, it does not always have to increase.
  • Production schedule – remember that even in the service industry, your business produces. For example, a medical practice produces a certain amount of patient appointments each year. Establish a reasonable production number, and make plans for what would happen if that number increased by 10%, or even 20%. Conversely, make plans for what would happen if that number decreased.
  • Calculating expenses – are you thinking about installing a new computer network? Do your employees need tablets instead of laptops? Is the rent going to increase or are you going to expand your physical location? Admittedly, these are larger expenses and obviously have an impact, but do not forget the actual day-to-day expenses.

The key to a solid, realistic forecast is gathering information from the past year. It is also crucial that you collect data from every part of your business. Ask department heads for their input, and remember it is never too late to start!

Prepared by Scott Mattingly, CPA, CFP, CRPS, a Principal at KatzAbosch and member of the firm’s Personal Financial Planning Group.  For questions, please contact Scott at smattingly@katzabosch.com, or 410-828-2727.

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