Planning Expenses for One to Five Years to Prepare for the Unexpected

by Sean Ross

1 min read

To increase your company’s chances of long-term success, you should forecast future spending for multiple years. This will let you plan ahead so you can set realistic goals for your company. Predicting your future spending can also let you manage your cash appropriately, so you can minimize large unexpected bills. If you operate a new small business, take a look at the spending patterns of your competitors to get a sense of what you can expect. Forecasting for multiple years lets you plan for major expenses that are likely to come up. Multiyear agreements may expire or software may need upgrading a few years in the future. Knowing this information now lets you begin saving for these large outlays. Forecasting also lets you plan ahead for slower periods of the year. If you know that you have a $10,000 anticipated expense during your slowest sales period next year, you can save money in advance, pay your bills on time, and not lose access to items necessary to do business. You can present this forecast to investors or banks as part of your business plan. Long-term forecasts should be between one to five years. They should also be rolling, so they always stay the same length. If you made a three-year forecast last year, you should check your expectations for the next two years and do forecasting for a third year into the future. Take some time to forecast your future operations to avoid surprises, make better decisions, and increase your long-term success.

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