When you own a business, or when the owner entrusts you with a major component of their business’s financial health, you would be perfectly justified in feeling more than a little bit scared. After all, the fate of an entire company may be resting squarely on your shoulders. And since money is the life blood of a business, the financial aspect is extremely important. Money has got to flow through the business efficiently, if the business is going to so much as survive, let alone thrive and grow into something that is even better. And one very important part of making sure that the business’s cash flows properly is to make financial projections. A financial projection is simply a goal which is tempered by the most likely variables to happen, looking into the near future.
If everyone in the world did financial projections, we would not live in a world where there are payday loan places on every street corner. And in some cases, since corporate debts are so pervasive and many companies are literally living from loan to loan, financial projections are more important than ever before. If more companies were to make (and actually take some guidance out of) their financial projections, we might live in a world that was not always perched on the very edge of a financial collapse like we saw back in 2008.
Of course, when you finally settle down to make your financial projections, you have got to use a sort of cautious optimism. If you just set ridiculously easy goals with the intention of smashing right through them, the only purpose is to give people at the top bonuses for essentially doing nothing. But if the analysts end up overestimating what you are going to make in some not too distant quarter, your credibility with investors is going to drop like a heavy stone. So make sure you aim for the positive part of the middling predictions.