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Pro tips for first-timers: setting goals and tracking forecasts for 2025. Here we come, 2025. The year-end financial review meeting could be a great opportunity to challenge entrepreneurs who’ve never set business profit targets. If you plan to offer your client a forecast, you're reading the right blog. Here's to big and small successes in 2025.
1. Assess the Current Situation
Once December is closed, start by examining the business's financial trends. Riskrate's 5-year financial overview gives you trends over five years. Make use of the report's ready-made analyses of metrics and benchmarks. Then, dive into the changes between the current and previous financial years. Riskrate's financial analysis immediately highlights problems in operations or potential cash flow issues.
Tip: If the current trend continues, what will the profit, cash flow, and equity look like in 2025?
2. Can Forecasting Accuracy Be Improved?
No matter how much effort goes into creating a forecast, we all know it’s challenging to predict 12 months. A forecast becomes far more useful when compared to actual results. Analyzing the difference between the forecast and the actual results helps businesses stay on course and adjust in time. This process can also improve forecasting accuracy.
Tip: Use Riskrate’s tax report with three different estimates of taxable income for the entire financial year to fine-tune your prepayment accuracy.
3. A Budget Sets the Framework
You can think of a budget as a framework for the business for the 2025 financial year. It outlines the key goals and financial metrics the CEO aims to achieve.
The board approves the budget, providing management with a framework for decision-making. Bonuses, investments, and funding are typically determined based on the budget. The downside? A budget is created once for the upcoming financial year, and its predictability decreases as the year progresses.
Tip: Create a budget easily in Riskrate by uploading data from the previous financial year as a base or starting fresh. Use the ready-made cash flow forecast linked to the budget or profit forecast.
4. Actual Results Are Facts
Actual results represent the realized financial metrics, showing how the company has performed. Results can only be analyzed once you have data from the completed reporting period.
It’s normal for actual metrics to deviate from budgeted ones. However, significant or consistent negative deviations indicate the need for immediate action. A budget or forecast has little value if changes are not acted upon. The purpose of comparison is to identify and understand the root causes of these deviations.
Tip: From Riskrate’s report gallery, choose a ready-made custom monitoring report for your client. Its traffic light system (green, yellow, red) highlights problems in operations or potential cash flow issues.
5. A Forecast Is Ever-Evolving
Many entrepreneurs maintain a rolling forecast alongside their budget. A rolling forecast is a management tool with a forecasting period of 3 to 12 months, depending on the business model. Combined with actual results, it gives the CEO an estimate of the full-year outcome.
Tip: Use Riskrate to create a directional forecast with AI. AI can identify hidden risks and opportunities you might otherwise miss.
6. The Most Important Step: Get Started
Creating a budget for the first time is the most challenging part, especially without data or benchmarks. With Riskrate, you can get started right away: create a rolling profit forecast using AI, upload history data and results, or start from scratch. This simplifies the process for first-timers.
Tip: Budgeting and forecasting teach you a lot about business and help you address deviations immediately. As your company grows, you’ll have more data to refine your forecasts. When creating a new budget, keep past variances in mind to improve accuracy each time.
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