4 Steps For Making A Mid-Year Forecast

June 2, 2021

4 Steps For Making A Mid-Year Forecast

With this year’s halfway point just around the corner, now would be a good time to start taking stock of your business’ financials, and to see whether you’re on track towards meeting this year’s goals.

While forecasts usually go hand-in-hand with planning your annual budget, making frequent forecasts are standard for a lot of businesses. You might hold them every month or every quarter if you’ve been in business for some time, or weekly to monthly if you’re just starting out.

It’s also common practice for businesses to adjust forecasts they’ve made at the beginning of the year as the year passes, particularly in response to current events such as the recent pandemic. 

As many businesses continue their post-pandemic rebuilding efforts, key decision makers may be struggling with the question of whether they should even still be in business. An upcoming mid-year forecast might be able to provide some answers.

  1. Refer to your results from the first half. Base your projections on past financial statements that reflect your complete transaction history. Only when you have a clear view of your past performance will you be able to make an accurate forecast.
  1. Choose your forecasting method. Established businesses can use the historical method, which uses financial statements that reflect your performance in the past year. New businesses that don’t have a whole lot of data yet can base their projections on research drawing from industry trends. Some businesses use a combination of both methods.
  1. Set specific revenue and expense goals. Make sure you know what the value drivers are when you set these goals so that you can monitor the factors affecting your performance. 
  1. Document your forecast. Prepare a pro forma income statement, cash flow statement, and balance sheet which show what your finances could look like for the rest of the year. 

Some businesses use a rolling forecast to give them more flexibility in responding to events as they happen. Similar to making frequent, quarterly forecasts, an example of a rolling forecast is one made at the beginning of the year, and then adjusting it every quarter. This is in contrast to static, yearly forecasts made at year’s end, which some businesses also use as a benchmark together with a rolling forecast.

Making allowances for optimal and not-so-optimal business conditions also form part of making a mid-year forecast, as they likewise enable you to make ad hoc adjustments to your budget.

When the year has drawn to a close, it will be essential for you to compare your mid-year forecast to the actual performance of your business. You’ll be able to gain valuable insight into why you were (or weren’t) able to reach your goals for the year and to plan your budget accordingly.

Book a discovery call with us today to help you make a mid-year forecast that can help you make the most of the rest of this year.