Predict your agency’s future with cloud forecasting

14 July 2017

There can be plenty of unpredictable financial ups and downs when you’re running a creative agency. So it’s vital for growth and profitability to keep a close eye on both the PRESENT and FUTURE of your finances – a task that cloud accounting software excels at.

As we’ve mentioned before, you need real control over your agency numbers and must measure the right key performance indicators (KPIs) to travel safely along the agency road. With financial control and KPI reporting in place, you’re better informed – so you avoid the common financial pitfalls and get the best productivity and profitability out of your business model.

But as the owner manager, MD or CEO, there comes a time when you need to stop looking in the rear view window and start looking forward – taking a view not of where you’ve been, or where you are now, but where you COULD be in the future.

Don’t just settle for a historic view

Traditional accounts are great for showing you the transactions you’ve made as an agency. You can see the money you’ve spent and the income you’ve made, all set out nicely in your profit and loss (P&L) reports and monthly management accounts.

But your accounts are limited. They only give you a historic view of your business – they show the road you’ve already travelled and very little about the route that lies ahead. You wouldn’t drive your car by sticking your head out of the side window and looking backwards, would you? So why would you do the self-same thing with your business strategy?

What’s needed is a better view of where you are right now, and a greatly improved overview of the future path of the agency.

So, how do you get this?

How cloud accounting moves you forward

The answer is to move to a modern cloud accounting system – and for our money, Xero online accounting is the platform that’s got the ease of use you need, combined with the reporting and app integration that will help you stop looking back at the past.

Where Xero makes a huge difference to your financial and strategic management is in giving you real-time numbers and reporting.

Traditional management accounts may be weeks, or even months, out of date by the time you read your management pack. With Xero, you have instant, mobile access to your numbers at any time in the month. And when Xero is set up with the right combination of live bank feeds, smart-scanning and automated data entry apps, the data in your Xero accounts is 100% up to date and delivering a real-time view of your business health as it stands right at this moment.

That ability to log into Xero and see exactly how your agency finances look RIGHT NOW, not how they looked two weeks ago, is a game changer.

And when you have real-time reporting, you can stick a big pin in your strategic route map and say with real confidence ‘This is where we are, and this is where we’re starting from!’

The power of forecasting

Putting Xero and cloud accounting at the heart of agency finances doesn’t just give you that all-important current overview of your financial position. It also helps you to achieve a future view of your core KPIs and important business information.

How does Xero do that?

  • It records your data – every bill paid, every customer sale made and every invoice payment received gets tracked and recorded in your Xero accounts. And that creates a huge pool of business data that’s logged and saved in the cloud.
  • It helps you analyse your numbers – because every transaction is tagged and coded in Xero, you can very easily break down the elements of your profit and loss into highly detailed reporting and analytics, all viewable from the Xero Dashboard.
  • It integrates with forecasting tools – whether you use an off-the-shelf forecasting app, or a bespoke software tool, Xero’s open API lets you delve into that business data and project all those numbers forward in time.
  • You get accurate projections – take your past revenue numbers, sales stats, or costs and extrapolate them forward to get realistic forecasts of income you can expect, sales you can aim for or costs you can budget for.

With Xero as the foundation for all your financial management, you have the data and connectivity to get the most effective forecast of where you’ll be further down the line.

Start scenario planning and getting strategic

Forecasting is an incredibly powerful tool, especially when you’re looking to plan the long-term goals of the agency. If you know how your business journey is likely to pan out over the next 6 months, 12 months or even 5 years then – in very basic terms – you’ll make better decisions.

And the key to getting the most value from these forecasts is to sit down and start asking yourself some very basic questions about the future of the agency.

  • Is growth your core goal, or are you more interested in staying small and nimble?
  • Is your pricing letting down your profit generation?
  • Where are you looking to focus your sales and marketing efforts?
  • Do you have an ideal client type, and are you targeting them well?
  • Are you focusing on the most profitable clients?

Once you know what the priorities are for the agency, you can start the ‘What if….’ process of scenario planning and using your forecasting tools to run through those numbers.

For example, if growth is your main objective for the next 12 months, you’ll need to look at your revenues and see if they’re likely to bring in the additional income you’ll need to put those growth plans into action. If forecasts show there’s a shortfall, you know you’ll need to look at other areas for your financing – making an informed decision to get the right access to finance, rather than trusting that sales will bring in the money you need.

If your forecasts show a seasonal dip in sales in coming months, that gives you the prior warning you need to cut back on expenditure in these months, or the time to offer discounts and focus on targeted marketing to make up that shortfall in sales and revenue.

By taking a peek along the road, you react, plan and budget to make the best of any scenario.

A tailored approach to forecasting

At FD Works, we specialise in working with the cream of the South West’s creative agencies. And we’ve found that forecasting is such a powerful way to help an agency achieve its true potential and put down a concrete foundation for financial success.

Xero’s our workhorse for all the accounting, reporting and analytics work we do for clients. And we have our own bespoke software forecasting tools that talk to Xero, mine the important data and give your agency the ‘crystal ball’ it needs to see further down the road ahead.

It’s time to look the future and move your agency over to cloud accounting

Who are FD Works?

Here at FD Works our team of accountants, business advisors and Xero experts help progressive businesses embrace their numbers, get control of their financial destiny and achieve their key goals. From our offices outside Bristol and Bath we work with aspiring startups, ambitious scaleups and established firms throughout the UK. 

Switch to Xero online accounting

Want a better view of the future of your creative agency? We’ll show you how forecasting really can be your agency’s best friend.

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