The following is a guest post by Philip Campbell, author of Never Run Out of Cash. See more from Philip Campbell at his website.

Financial Forecasting Will Strengthen Your Leadership Muscles

by Philip Campbell

The essence of financial forecasting is turning numbers into insight.

It’s about transforming financial statements into an action-oriented tool for better decision-making.

Creating the forward-looking view of financial performance will help you:

– Identify the dangers and opportunities that lie ahead
– Develop a deeper understanding of your business model
– Think strategically about driving profitability and cash flow higher

Financial forecasting will also help you in a way most entrepreneurs have not thought about. It will help you:

Strengthen your leadership muscles

Leadership is about taking a company on a journey and building a team that understands your vision and signs on to the work and commitment required to create success.

The best leaders do a fantastic job of communicating their vision for the company and attracting the talent that can help turn their vision into reality.

It requires that you persistently and consistently talk about the vision you have for the company. Always helping people both inside the company and outside the company to more clearly identify with your goals and what success looks like to you.

Painting the Picture Financially

Financial forecasting is the ideal tool to help you paint a picture of what your vision and goals look like financially. It helps you lead people in the direction you want the company to go financially.

The forecasting process is about hooking your vision and strategy for your company up to the likely financial implications of achieving that strategy. It forces you to think about your company, and communicate your vision, in a little different way.

It exercises your “leadership muscles” because it helps you link your vision to a range of likely financial outcomes. It helps you put some “guardrails” around what you think should happen financially. It helps you communicate your vision to others in a much more concrete way.

This is especially helpful if you are trying to raise capital or attract a lender. Financially minded professionals love a great vision… together with a well thought out path for how the leader plans to translate that vision into financial results (money).

It also pays dividends when communicating your message to people inside your company.

Now is the ideal time to exercise your leadership muscles by painting the financial picture of where you are taking your company.