Quarterly forecasts happen – you guessed it – every three months or every 90 days. They are generally more detailed than an annual forecast, but less detailed than a monthly one. (Last week we spoke about the annual budget process.)
Quarterly forecasts can help you plan for seasonal changes – say, if you have a busy holiday season in December – or if you have a frequent inventory turnover. It also gives you the opportunity to compare periods of time to see how things are progressing.
If you are governed by a board of directors or report to investors, quarterly forecasting acts like a checkup, or a financial snapshot, to make sure you’re on the right track. If you’re a public company, you can also share this data widely.
When is quarterly forecasting not a good choice? Business finances can change rapidly, so if you tend to have a less-stable cash flow, forecasting every three months may not be frequent enough (this goes back to the question about where your revenue comes from). You may be able to get away with quarterly cash flow forecasting if you have more of a predictable, reliable income and fixed expenses that don’t exceed your receivables. Otherwise, you may want to forecast on a more frequent basis – perhaps monthly. Join us next week for more detail on that!
Are you budgeting or forecasting quarterly? What other things should our readers consider if they’re going to start?