The projections that we have allow us to have a control over all the items of the organization. With this we can know the performance of each area, distinguish what we need to improve and how much we should invest.
Steps to follow
Before making a financial projection, consider that it is necessary to have basic notions of finance. If this is not your case, ask your accountant for help or download the Internet files that facilitate their preparation. On pages such as:
Know your company.
Víctor Calderón, founding partner of ArCcanto – a consultancy specializing in financing for SMEs – points out that the first thing is to analyze your market and your production capacity. Master the figures of your organization will help you to have an overview of the current situation to make a realistic projection.
In the case of GYEC, before carrying out a financial projection they carry out a SWOT analysis (of strengths, opportunities, weaknesses and threats) of the company in general, to observe the situation in which it is found both internally and in the market.
Determine the projection time
The financial projections can be monthly or annual or, as is usually done, to five years, depending on how the company works. It is advisable to do them every 30 days, to evaluate the goals periodically.
The GYEC model allows managers to perform tactical planning where they organize the strategies they will carry out month after month to fulfill the purposes. To do so, they contemplate the budget they were granted in the projection and review that the measures are aligned with the business philosophy.
And not only that. They constantly monitor each area to measure the achievement of objectives through an internal system they call “traffic signaling”. When one of the indicators is green, it is because the goals are completed in time and form. When it is in yellow, there is a problem to which attention should be paid. And when it is red, it indicates that expectations were not met. This same system qualifies the performance and results of the firm’s collaborators.
Analyze your case
If it is a new investment project, you must estimate the price of the product and the cost of operation, in addition to establishing the policies of costs, expenses and other indicators. For a company that is already underway; you should start from the latest financial statements with the support of tools such as Excel or specialized software.
Create a statement of results
Once the above points have been resolved, break down each indicator of the income statement. This document must reflect the income, expenses and costs of the company. “Look historically at how you have been to determine how you want to be,” says Calderón.