Unit 3. Forecasting

Vocabulary

Forecast –предсказание, прогноз

Negotiate – вести переговоры, совершить сделки

In advance –заранее

Insufficient – недостаточный

Lender – заимодавец

Bankruptcy – банкротство

Estimate – оценка, смета

Cash flow – оборот наличных денег

Balance steel – балансовый отчет

Profit and loss – прибыль и убыток

Forecasts are the kernel of your business. They are the basis on which you raise money, negotiate premises and other raw ma­terials. These are only a few of the decisions which need to be made in advance with only your forecasts as guidance on how much is needed. Making a wildly inaccurate forecast can, for example, lead to raising insufficient funds. When the business fails to meet expectations and begins to run short of money, it may prove impossible to raise further funds. Lenders are very wary of handing out more when forecasting has proved to be mistaken. The result could be liquidation or bankruptcy if you are a partner or sole trader, and the end of your dreams.

However, making no forecasts at all is even sillier. You would have no guidance on when to take certain basic business deсisions.

Given the importance of attaining a reasonable estimate of future sales, costs and cash balances, it follows that making the forecasts is a process which should not be hurried or trea­ted casually. You must constantly strive to seek information on which forecasts can be based; you must constantly curb your over-optimism which can lead to estimates sales figures that are too high and estimated cost figures that are too low. Ques­tion your first forecasts for the realism of their assumptions, before accenting any figure as a part of the final forecasts.

Nevertheless, it is realistic to accept that some of the figures will be nothing more than в best guess given the cur­rent state of information available to you. However, our figu­res should have some grounding in fact, so when you present your case to your bank manager or other source of finance you can support the figure when challenged.

It is important to make the forecasts in our plan realis­tic so that if your business idea does not hold water, you can discover this at the planning stage. You do not want to discover two, years down, the track that your business will not work, after you have committed money, time and effort. Do not under­estimate the mental anguish and financial problems which can be caused by a struggling business.

There are three forecasts you need to make:

-Cash flow;

-Profit and loss;

-Balance sheet.

Answer the questions according to the text:

1. Why are forecasts the kernel of one's business?

2. Why is making no forecasts silly?

3. What kind of information must be constantly strive to seek

4. Why figures you present to your bank manager should have grounding in fact?

5. What three forecasts have you to make starting business?

Exercises: