E-Commerce: An Introduction To Business Forecasting And Budgeting
Day-to-day financials tend to be pretty straightforward for an e-commerce business. When the day is done, just tally your sales to know how much your business grossed. If you want to get fancy, deduct your daily expenses and you’ll have your gross profits for the day.
But what about future earnings?
Unfortunately, we are not able to predict the future, instead, business forecasting is about making educated guesstimations and inferring future outcomes from available data and trends. In this way, you could say that business forecasting is more of an art than a science.
All business owners should be using forecasting for one reason or another. Especially for e-commerce, business forecasting provides a tentative roadmap so you can make smarter, more informed business decisions.
Don’t confuse business forecasting with sales forecasting, however.
In this post, I’ll be covering:
- Business forecasting and sales forecasting are valuable actions to help your business grow
- Having an accurate and reliable e-commerce business forecast is key
- E-Commerce forecasting is easy once you have your goals in mind and the right tools in place
- Continue reading…
When it comes to the world of e-commerce, there is a whole different set of rules at play. We cover a lot of topics related to e-commerce on the Brixx Blog, including:
Business forecasting and sales forecasting are valuable actions to help your business grow
Business forecasting
Although it would be nice to know for sure how a business will perform over time, forecasting is the next-best thing. In fact, business forecasting even has a number of practical, real-world applications. Business forecasting can help:
- Identifying opportunities
- Assessing problems and risk
- Setting goals
- Human resources
- Finding investors
- Creating budgets
Sales forecasting
Besides estimating future cash flow, sales forecasting can help you in other ways when managing your shop:
- Tracking opportunities
- Anticipating a problem
- Setting goals
- Human resources
- Budgeting
Our full article “E-Commerce: An Introduction To Business Forecasting And Budgeting” takes a deeper look into each of the above points.
An array of tools and platforms exist that now allow businesses of any type and size to more easily and more effectively run their business projection models and plan for their goals — Sign up for a 7 Day FREE Trial Of BRIXX.
Having an accurate and reliable e-commerce business forecast is key
E-commerce forecasting falls into inventory, orders, and receiving — but there is a process behind it. That forecasting requires accounting for how much stock is available to fulfill an order. It helps the bottom line by projecting how much inventory multiple warehouses need to reduce shipping costs and time. It also improves cash flow, which is something everyone can get behind. Those elements combine to shine a light on predicting what’s needed to fulfill the current slate of orders while forecasting demand for future purchases. Specialized software like Brixx exists to help make business forecasting for your e-commerce company a lot easier.
In short, getting ecommerce predictions right does matter. Without an accurate forecast, you’ll have no way to plan for the possibilities of tomorrow.
Getting the forecast right the first time
In e-commerce, however, you’re only as good as your next successful transaction. To make sure you get your predictions right as often as possible, here are three ways to forecast your business needs accurately:
- Stay out in front by establishing a reorder trigger to automatically restock high-demand items; calculate your lead-time demand and safety-stock in terms of days, coming up with a firm number for each item and just that threshold as needed but use it as a benchmark.
- Experiment a little as forecasting comes in all shapes and sizes. Try out a few different methods to see which one works best for you. Be sure to include internal and external factors and create multiple scenarios based on best and worst cases as well as accounting for possibilities in between.
If you have a minute, take a look at “5 Benefits of Cloud Accounting Software for your Small Business” from Luke Fletcher (@LukejFletcher) — just another reason to use a financial modelling software that integrates into your business’s accounting tools.
By Incorporating a reliable forecasting process into your business model, you’re sure to enjoy a bright future as you’ll be prepared for many, if not most, possible scenarios.
E-Commerce forecasting is easy once you have your goals in mind and the right tools in place
E-commerce forecasting, in a nutshell, is the process of anticipating how much budget you’ll spend, on what (and which platforms and marketing strategies), and calculating what the return on investment looks like. It’s a type of working spreadsheet that helps you know what and where you’re spending, how you’re managing your money, what returns you can anticipate and more.
The one thing businesses look for is clarity or an informed approach to forecast e-commerce performance for the next 12 to 18 months. Forecasting should happen in tandem with figuring out what your customers are looking for, lining up your content strategy, setting up your advertising campaigns, and other digital tactics. Speed, timing and the ability to multi-task is everything.
In our full article “E-Commerce: An Introduction To Business Forecasting And Budgeting”, we take you through how each of the below points can help you create a better picture of where your business will be headed.
- Identify financial goals
- Balance growth with your rainy day fund
- Budget from multiple forecasts
- Stick to, and update, your budget
Some best practices while forecasting for your ecommerce business:
- Identify a timeframe for which you’re budgeting such as quarterly, which is a popular choice.
- Analyze the fixed or variable costs you can reduce, eliminate, or avoid to achieve your goals.
- If your goals are data-based, project how many site visitors or buyers you’ll need to reach reasonable conclusions.
- If your goals are revenue-based, project how much gross profit and physical inventory you’ll have to move to reach your goals.
- Bear in mind that seasonal demand often impacts ecommerce businesses.
- Remember to account for money deposited to a rainy day fund.
Planning in uncertain times is, well, uncertain. Ecommerce businesses are particularly susceptible to consumer behavior and sudden downturns in disposable income. You’ll want to do your best to make informed projections and budget accordingly.
Utilizing a specialized forecasting software, like Brixx, can not only save your business time and valuable resources but it reduces the margin for error and can help you predict up to 10 years into the future. Many software solutions like Brixx offer integrations into accounting tools like Xero or Quickbooks — making it that much easier to compare your forecasts to your actuals.
Tools like Brixx, whether used as a standalone or with Xero aim to make business projection and planning as simple as possible with dedicated solutions for startups, businesses, and a partner program available for accountants — see how Brixx can work for you today.
Continue reading…
Interested in hearing more about what we’ve discussed in this post? Take a look at the full blog post “E-Commerce: An Introduction To Business Forecasting And Budgeting” where we dive deeper into what we’ve touched on today as well as discuss how software like Brixx helps businesses create more accurate forecasts. — Don’t forget to take a tour of Brixx with the Bike Shop Demo.
