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The top 3 benefits of financial projections and why they matter

laptop, person writing on notepad, and financial projections on a piece of paper

The benefits of financial projections go well beyond simply knowing where you are and where you might be headed. Financial projections can drive growth and help you make informed decisions within your business – whether you’re a small local coffee shop or a hundred million dollar software company. 

What are the top benefits of financial projections?

There are many benefits involved with creating financial projections for a business, but let’s break down the 3 most important benefits of financial projections:

  • Know where you’re at: One of the most obvious benefits of building financial projections is that it can give business owners and managers a better understanding of where their business is currently at financially and where it is projected to be in the future. This can help them make more informed decisions about where to allocate resources and how to plan for growth. 
  • Know where you can go: Additionally, financial projections can give investors and lenders a better idea of the business’s financial health and its ability to repay loans or generate returns on investment. 
  • Know what can be better: Financial projections can also help businesses track their progress over time and identify trends that may impact their bottom line. All in all, this can help companies realize their full potential and drive growth. 

By understanding the benefits of financial projections, businesses can make sure they are using this valuable tool to its full potential.

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What should be included in financial projections?

A company’s financial projections are an essential part of its business plan. They provide a snapshot of the company’s expected financial performance for the upcoming year and help to inform decisions about investments, expansion, and other strategic initiatives. 

Here’s a quick list of items that should be included in your financial projections: 

  • Income and expenses
  • Balance sheet showing the company’s assets and liabilities
  • Assumptions about sales, costs, inflation, interest rates, and other factors that could impact the company’s bottom line 

By providing a clear picture of the company’s expected financial performance, financial projections can help to ensure that the business is on track to meet its goals.

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Who should you share financial projections with?

Financial projections are an important tool for any business, large or small. They provide a roadmap for where the company is headed, and they can be used to make decisions about future investments and growth. But who needs to see financial projections within a company?

At the most basic level, financial projections should be shared with anyone who has a financial stake in the company, such as shareholders, creditors, and lenders. However, they can also be useful for managers and employees who need to understand the company’s financial health and make decisions accordingly. 

In short, financial projections are a valuable tool for anyone who needs to know where the company is headed financially.

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Interested in additional financial resources and tips?

We’ve got you covered. At New Life CFO, we help companies of all shapes and sizes better understand and take control of their financial present and future through fractional CFO services. Reach out to us online for a free consultation or check out our additional resources for more insight.

If you need improved financial results immediately, watch our three-part series on how to create financial stability now and improve profitability for the long term.