Not to be confused with other types of forecasting, financial forecasting takes your business’s historical and current performance to estimate its future revenue, profits, cash, expenses, and more. It’s about getting a clear picture of your company’s future to make better-informed decisions about your business moving forward.

Generally, businesses use financial forecasts to plan for the upcoming quarter or year. Because they cover multiple reporting periods, forecasts are often revised and adjusted to account for trend changes, unforeseen factors, etc. 

In addition to helping you estimate your company's future finances, financial forecasts are often used in other areas of business such as in business plans, funding pitch decks, and more. 

What are the other types of forecasting in business?

General business forecasting is where your company would use tools and techniques to predict changes in the business such as sales, profit, losses, etc.

Accounting forecasting would see you use past and present data to estimate what future costs lay in your company's future such as inventory, utilities, insurance, etc.

Demand forecasting can help you, in conjunction with your sales forecast, to predict market needs and wants.

Sales forecasting is where your company would estimate future sales and predict future needs like workforce increases, resources, etc. 

Capital forecasting, while not as reliable as other forecasts, allows you to make predictions for changes in your company's capital, liquid capital, and cash flow. It takes more guesswork than the others, but it can include cash and savings, revenue, lines of credit, accounts receivable, assets, and more. ‍

Using financial forecasting for business plans

Every company is different and as a result, no two business plans will be alike. This is because a business plan should cater to your company's specific goals and needs. However, there are certain elements of a business plan that remain largely universal, no matter how you choose to present or compile them. These are: 

• Executive summary
• Products and Services
• Market research
• Competitor analysis
• Objectives
• Pricing strategy
• Marketing & Sales plan
• Operations plan
• The Financial forecast
• Appendix

You can read more about how to write a business plan in our free guide but here, we'll be focusing on the top tools you can use to take your plan to the next level when it comes to the financial forecasting section! 

Using spreadsheets to build financial forecasts

While it's true that you can do anything with a spreadsheet, tools like Excel and Google Sheets are lagging behind specialised tools when it comes to financial forecasting and business plan creation.  

Spreadsheets aren't going anywhere and they'll be used as a primary tool for a number of different applications throughout your company's lifetime, I'm sure. But, just because they've been the go-to for finance for the past thirty-plus years, it doesn't mean they don't have their drawbacks. 

Due to their highly manual nature, spreadsheets are prone to human error. This means that no matter how meticulous you are, it's easy to slip up and add the wrong formula here, or forget a plus sign there, etc. Additionally, spreadsheets can create version control confusion, be difficult to collaborate on or share, contain stale or incorrect data - and the list goes on. 

For these reasons, financial beginners and experts alike are turning to specialised tools to create financial forecasts, gather data for business plans, and more. As they aid in the decision-making process, goal attainment, and financial sustainability of your company, financial forecasts should be as accurate as possible. 

3 Tools better than spreadsheets to create your financial forecasts

With an effective financial forecast, your business can:

• Have an insightful basis for your budgeting decisions
• Show investors and creditors that your company has a plan for unexpected circumstances
• Ensure that you are financially prepared for the best- and worst-case scenarios
• Identify what variables can have short and long-term impacts on the company
• Keep you from being blindsided by events that could impact performance
• Prepare you for increases in demand and growth

When choosing a forecasting software you should look for a tool that can allow you to immediately improve the accuracy of your forecasts. Not only that but it should make your forecasting process more efficient. Effective forecasting tools should be able to execute sales forecast simulations and outcomes and make changes to the drivers behind these to project future impact on performance, amongst other things.

You should be looking for software that can:

• Run multiple scenarios
• Plan across any time horizon
• Budget the way you want
• Increase collaboration and adoption
• Connect all your systems

It may seem like a lot to think about now but we've listed our top forecasting tools below to help you get started!

Top financial forecasting tools

1. Brixx

Brixx is a financial forecasting tool that allows you to create reports and charts to record your bills, expenses, and profit of your company. It provides an overview of your business’s financial performance and presents ways to improve, in a clear and easy-to-understand manner. Among other features, Brixx already integrates with Crunch and allows for:

• Scenario testing
• Teamwork, sharing, and collaboration
• Multi-year forecasting
• Actuals vs forecasts
• and more...

If you're looking for a tool that helps you explore multiple long-term goals, comes with quick-start templates, and automatically generates three-way forecasts, Brixx is the one for you. With an easy-to-navigate dashboard, you can monitor your finances through Brixx and discover new ways to watch your business grow.

2. LivePlan

LivePlan supports entrepreneurs and small-to-medium-sized businesses in planning, funding, and growing themselves by creating dynamic business plans. While built with business plans at the forefront, LivePlan has automated financials and built-in equations that help you spend less time number-crunching.

Among other features, LivePlan allows for:

• Organising of pitch ideas
• Financial report building
• Access to sample business plans
• Step-by-step business plan instructions
• ...and more

If you're looking for a guided process to creating a business plan, then LivePlan is a good bet! It gives you the insight to write a plan that will better help you secure funding. 

In our opinion, the disadvantage to using Liveplan is it’s great at creating your business which is a one-off event. What you need is to persistently be looking at your business forecasts to manage your success. You need a tool that is designed for this, which is why we integrated with Brixx.

3. Pulse

Pulse is a forecasting app that is designed specifically for small businesses to help them make smarter business decisions. It’s praised for its effective cash flow management capabilities and allows for, among other things:

• Report sharing and file attachments
• Cash flow organisation and management
• Automated growth and expense curves
• Adjustment of past transactions
• ...and more

If your business aims to operate internationally or in multiple languages, Pulse is an excellent choice! Easy to set up, and it aims to help small businesses track and improve cash flow.

The disadvantage to Pulse, in our opinion, is the price point. When compared to our integrated partner with Brixx, you can manage all your forecasting needs at a fraction of the price. While diving through the vast ocean of information out there on forecasting and business planning tools, just remember that it all comes down to what you want for your business. Is that simplicity? Multiple currencies? Extended range forecasts?

Well...no matter what your business is looking for, we hope we've given you some insight into why it's best to go with a specialised tool for your financial forecasting efforts and business planning activities. 

Be sure to check back regularly for more jargon-free business advice and while you're at it, read more about financial forecasting with Crunch!