How Often Should You Update Your Forecast?
Let’s say you built a financial forecast at the start of the year. Sales projections, expense estimates, cash flow expectations—all neatly laid out in a spreadsheet.
But here’s the problem:
Business rarely goes exactly as planned.
Maybe you land a huge new client. Or a key customer leaves. Costs spike. Revenue dips unexpectedly.
If you’re relying on a forecast from six months ago, you could be making decisions based on old news.
So… how often should you update your forecast?
The Short Answer: It Depends
There’s no one-size-fits-all answer. How often you update your forecast depends on:
✅ How fast your business is changing
✅ Your industry’s volatility
✅ Cash flow tightness
✅ How much risk you’re comfortable taking
Real-World Examples
Let’s look at how this plays out in different businesses:
Example 1: The E-Commerce Brand
An e-commerce startup sees massive sales spikes during Diwali and Christmas, but slower months otherwise.
- Updating their forecast monthly helps them:
- Predict cash flow gaps
- Plan inventory purchases
- Avoid over- or under-spending on marketing
If they waited until year-end, they’d be flying blind.
Example 2: The B2B Services Firm
A mid-sized consulting firm has steady retainer clients and predictable expenses.
- They review their forecast quarterly because:
- Revenue doesn’t swing wildly
- Costs remain stable
- Monthly changes are minor noise
Quarterly updates keep them proactive without wasting time.
How to Decide Your Update Frequency
Here’s a simple guide:
✅ Monthly Updates
Best for businesses that:
- Are growing rapidly
- Have high sales fluctuations
- Operate with tight cash flow
- Depend on seasonal trends
Examples:
- Retail stores
- SaaS startups
- Hospitality businesses
✅ Quarterly Updates
Best for businesses that:
- Are stable with predictable revenue
- Have longer sales cycles
- Experience minimal seasonal swings
Examples:
- Law firms
- B2B service providers
- Niche manufacturers
✅ Annual Updates (Not Recommended Alone)
Some small businesses only forecast annually. But that’s risky. So much can change in 12 months.
Even if your business is stable, it’s smart to check your numbers at least quarterly.
What Should You Review Each Time?
When updating your forecast, focus on:
- Actual revenue vs. projections
- Shifts in expenses (rent hikes, new hires, supplier cost changes)
- Changes in customer demand
- Cash flow needs for the next 3–6 months
Quick Tip: Use a Rolling Forecast
Instead of planning only for the calendar year, many businesses use a rolling forecast.
Example:
- Each month, you drop the month just completed and add one more month at the end.
- This way, you’re always looking 12 months ahead.
It keeps your vision forward-looking and your decisions nimble.
How a Virtual CFO Can Help
If updating forecasts sounds like a lot of extra work—that’s where a Virtual CFO comes in.
A Virtual CFO can:
- Analyze your business rhythm to recommend the right update schedule
- Handle forecast updates for you
- Spot early warning signs you might miss
- Help you adjust quickly when things change
They’re your financial co-pilot, ensuring you’re making decisions with the latest numbers—not last year’s guesswork.
Final Thoughts
So let me ask you: When was the last time you looked at your forecast?
If it’s been more than a few months, it’s time for a refresh. Because in business, the only thing worse than no plan… is following an outdated one.
Need help figuring out the right forecast rhythm for your business? A Virtual CFO might be exactly what you need. Let’s talk!
