Monthly Projections are an important tool for running your business in “normal times”. During the pandemic they are doubly so.
Projections are the result of all of the hard work you’ve done in creating the assumptions (using the Create Your Assumptions worksheet). Now you’re going to take the assumptions and turn them into numbers.
We’ve provided two ways to begin the process if you don’t already have projections.
- Instructions on how to use QuickBooks to create an Excel spreadsheet of your 2020 Monthly P&L’s that you can use as a base. This is the best way to do projections as you are building off your own history in the P&L format that you’re used to using.
- Templates to begin from scratch:
You can also enlist your CPA or bookkeeper to assist.
And if you’ve been working with one of the VtSBDC Advisor that uses a tool called FIN then make contact with them to make an appointment to update.
The ability to do projections is simply the ability to line up your Profit and Loss statements for 12 months in the future so you can have a preview of what your revenues and expenses will be and what your all-important bottom line profit can be. Is this a guestimate? Yes. But if you do the background work it is a highly informed one.
No doubt COVID-19 has made this process less informed as it has buffeted businesses. But its effects are less mysterious then they were last year when it hit in the first quarter. You now have three full quarters of what the pandemics effect has been on your numbers. For some it has been an unrelenting decline and for others it has been less so. But you know exactly where your business is from a financial standpoint so now you can take those numbers and apply them forward.
Why bother to do projections or 13-week rolling cash flows…why do we keep asking you to stop and do this work (forget during a pandemic why do we ever ask you to do this work)? Because numbers (your financials) are the quickest, most realistic, most effective way to understand exactly how your business is doing. Not what you think it is, or wish it is. What it is 100% actually doing. And it is always imperative, but again doubly so in an emergency, to know reality.