How to create a financial forecast for a call center?
Developing and maintaining an up-to-date financial forecast for your call center is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a call center financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a call center?
The financial projections for your call center act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your call center's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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What information is used as input to build a call center financial forecast?
A call center's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing call center, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a call center startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the call center running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your call center's financial forecast.
The sales forecast for a call center
The sales forecast, also called topline projection, is normally where you will start when building your call center financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing call centers), and consider the elements below:
- Competition: As more call centers enter the market, they may offer lower prices or better services, leading to a decrease in your average price or number of monthly transactions. Keep an eye on your competitors and stay ahead by continuously improving your services.
- Economic conditions: A downturn in the economy may lead to fewer companies needing call center services, resulting in a decrease in your number of monthly transactions. Make sure to monitor economic trends and adjust your forecast accordingly.
- Technology advancements: With the advancement of technology, some businesses may opt for chatbots or other automated solutions instead of traditional call center services, leading to a decrease in your number of monthly transactions. Stay updated on the latest technology and consider incorporating it into your services to stay competitive.
- Labor costs: An increase in labor costs, such as minimum wage laws, may result in higher prices for your services, potentially leading to a decrease in your number of monthly transactions. Keep track of labor costs and find ways to optimize your workforce to mitigate the impact on your prices.
- Customer satisfaction: A decrease in customer satisfaction can lead to a decrease in your number of monthly transactions, as dissatisfied customers may stop using your services. Make sure to regularly gather feedback and address any issues to maintain a high level of customer satisfaction.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a call center
The next step is to estimate the costs you’ll have to incur to operate your call center.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your call center's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and training for call center agents and supervisors.
- Accountancy fees: These are fees paid to accountants for financial and tax-related services, such as preparing financial statements and tax returns.
- Insurance costs: Call centers need insurance coverage for liabilities, property damage, and workers' compensation.
- Software licenses: Call centers use various software applications for call routing, customer relationship management, and data analysis. These require annual or monthly license fees.
- Banking fees: Call centers need bank accounts for processing payments and managing cash flow. Banks may charge fees for services such as wire transfers, check processing, and account maintenance.
- Telephone and internet expenses: Call centers rely heavily on telephone and internet services for communication with customers. These expenses can include monthly service fees, long-distance charges, and internet service provider fees.
- Office rent: Call centers need a physical space to operate, which often requires paying rent to the landlord.
- Utilities: Call centers use electricity, water, and other utilities in their daily operations.
- Marketing and advertising: Call centers may need to spend money on marketing and advertising efforts to attract and retain customers.
- Training and development: It is essential for call center agents to receive ongoing training and development to improve their skills and knowledge, which incurs expenses such as training materials and instructor fees.
- Office supplies: Call centers need various office supplies, such as paper, pens, and printer ink, to operate efficiently.
- Maintenance and repairs: Equipment and facilities in call centers require regular maintenance and occasional repairs, which can incur expenses.
- Travel expenses: If call center agents need to travel for business purposes, their travel expenses, including airfare, lodging, and meals, are considered operating expenses.
- Consulting fees: Call centers may need to hire consultants for specific projects or to provide expertise in certain areas, which can incur fees.
- Employee benefits: In addition to salaries, call center agents may receive benefits such as health insurance, retirement plans, and paid time off, which are considered operating expenses.
This list is not exhaustive by any means, and will need to be tailored to your call center's specific circumstances.
What investments are needed to start or grow a call center?
Your call center financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a call center, these could include:
- Computer Hardware: This can include items such as desktop computers, laptops, servers, and network equipment that are necessary for the day-to-day operations of your call center.
- Telephony System: A reliable telephony system is crucial for any call center. This includes equipment such as phones, headsets, and a PBX (Private Branch Exchange) system.
- Furniture: Comfortable and ergonomic furniture is important for the well-being of your call center agents. This can include desks, chairs, and other seating options.
- Call Center Software: There are many software programs designed specifically for call centers, such as customer relationship management (CRM) software, workforce management software, and call routing software.
- Security System: A secure call center is important for protecting sensitive customer information. This can include items such as security cameras, access control systems, and data encryption software.
Again, this list will need to be adjusted according to the size and ambitions of your call center.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your call center
The next step in the creation of your financial forecast for your call center is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a call center?
Now let's have a look at the main output tables of your call center's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy call center's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established call center will look different than for a startup.
The projected balance sheet
The projected balance sheet gives an overview of your call center's financial structure at the end of the financial year.
It is composed of three categories of items: assets, liabilities and equity:
- Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
- Liabilities: are the debts of your call center. They include accounts payable (money owed to suppliers), taxes due and bank loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The cash flow projection
The cash flow forecast of your call center will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the call center's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your call center is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your call center's financial plan.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your call center's financial projections?
Building a call center financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial forecasting software to build your call center's projections
The modern and easiest way is to use an online financial forecasting tool such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our projection software for free by signing up here.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your call center financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your call center's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free call center financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your call center's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your call center.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a call center. Don't hesitate to contact us if you have any questions!
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Financial forecast example
- How to write a business plan for a call center
- Sample financial forecast for business idea
- How to project sales for a business?
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Founder & CEO at The Business Plan Shop Ltd
