Monthly forecasting – or reviewing your budgets every 30 days and putting together a new plan – is generally the best option to look at more detailed items, like line-by-line expenses, supply ordering, revenue growth targets, and the like. Think of it as a map or outline to help you stay in the right direction.

With monthly forecasts, you can get good insight into your ongoing financial health and make sure you don’t hit any overdraft limits or run out of cash in the middle of the month.

Time series data is also great to measure on a monthly basis. For example, how long it takes to complete a project, or calculating the monthly ROI on a new sales position or tech investment.

While quarterly or annual forecasts can be great for planning long-term goals – like “increase revenue by 20% by the end of the fiscal year” – monthly forecasts are what make sure you’re on track to get there. If you want to cut office supply costs by 10%, for example, that reduction might come from a combination of smaller line items that add up during the year. In that case, you’d need to be keeping a closer, more detailed eye on where office supply expenses are coming from.

If your business is just starting out or has undertaken a recent significant change (new strategic plan, expansion, big staff turnover, etc.) monthly forecasting is really your best bet. Same goes if you’ve experienced financial trouble or have historically gone over project budgets.

Also, depending on the industry, you may rely on more frequent sales to make your bottom line, or have a particular target you want to reach each month. In that case, monthly forecasting will be needed to make sure you’re on track. Some industries, like retail and hotels, forecast even more frequently – weekly, or even daily. But most businesses do not.

Where monthly forecasting isn’t always ideal is evaluating the effectiveness of long-term plans. Sometimes you can tell right away if a product or strategy isn’t working and adjust accordingly, but there could be other factors involved in why a certain month is not performing as well as you hoped. Be sure to keep in mind all the variables and do not change course every month, unless it is absolutely warranted. You do not always want to sacrifice long-term vision for short-term performance.

What else should our readers consider when looking at the pros and cons of a monthly forecast?