2020 brought many unexpected surprises, from forced lockdowns to restricted density in restaurants and stores. For most small businesses, these restrictions will still affect sales in 2021. But uncertainty doesn’t mean you can’t forecast or plan. In fact, managing a business in uncertain times requires more frequent forecasting and a more fluid response to change. Here’s what looking at your sales data for the last twelve months can tell you about future sales, and how to thrive in spite of rapid changes in your community.
Forecasting is estimating your future sales and revenue, and can be incredibly useful for planning and budgeting. In fact, accurate forecasting is a crucial component of managing your cash flow. While there are factors outside your control (such as an unexpected global pandemic), there are many parts of your business you do control. For example, a more accurate forecast lowers your unused inventory costs and your labor costs, which increases your margins. Accurate forecasting can even help with longer-term planning such as expanding into new locations.
Before you dive into Clover’s Reporting tool, consider what types of changes affected your business last year and when they happened. The three most likely scenarios are:
Once you have date ranges in mind, you can look at each report and compare year-over-year or month-over-month to see what changes occurred. The ability to compare time periods is game-changing because it shows you overall trends that will help you manage inventory, labor costs and even identify overall trends in consumer behavior.
You can then develop plans for different scenarios so you can pivot quickly as things change. For example:
Note: Reports are only as accurate as the data feeding into them, so make sure your sales, orders, and inventory are recorded properly and that you don’t have any duplicate items which would make your data inaccurate and misleading.
Ready to get started? Check back for our next article in this series detailing which reports you can pull and how to leverage them for better forecasting. [after the second article is published, rewrite and link to that article]
Want more information on measuring the financial health of your business? Check out these articles:
This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.
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