The Top Five Ways to Keep Your Forecast Relevant

The Milestone Team August 23, 2023
Why a monthly financial review meeting will change your business

Financial forecasts are my specialty. I’ve built well over 100 forecasts in my career as a CFO. Often times, it’s a one-off project for a client my company and I do not provide recurring work for. Each time I do one of these projects, I give the company tips for keeping their forecast relevant. 
Forecasts are like cars. They truly help drive businesses to where they need to go. However, they need to have regular tune-ups to keep everything running smoothly. 
Here are my top five suggestions for keeping your financial projections relevant.

  1. It’s all about revenue – The most difficult (and arguably the most important) part of preparing any financial projection model is forecasting revenue. You should update your revenue projections at least monthly.  In order to do this, it is a good idea to use a tracking tool.  Whether it’s, Highrise, or even a simple Excel spreadsheet, you should utilize a reliable pipeline-tracking tool to help you forecast revenue. Having the right tool in place is only part of the answer though.  In order to get meaningful information from your pipeline report, you must have a disciplined process for updating the data and interpreting the results. 
  1. Get others involved – If at all possible, avoid the temptation to update the forecast by yourself.  It is a good idea to solicit input from other key personnel in your organization in order to get the most accurate update on the business.  Try scheduling a standing monthly meeting with your team to get their input on sales projections, personnel changes, capital expenditure needs or upcoming business expenses. 
  1. Set up an interface with your accounting system – When it comes to building an efficient forecasting process, it is important to design it in such a way that it interfaces with your accounting system.  Set up an “Export” tab in your spreadsheet where you can cut and paste the financial data from your accounting system.  You can significantly reduce the time that it takes to roll forward your model each month, thereby increasing the likelihood that it actually gets done.
  1. Don’t forget the balance sheet – By far the most overlooked element of a financial projection is the balance sheet.  Too many business owners stop at the income statement when preparing a forecast.  By doing so, you are only getting part of the picture.  Take the time to project your balance sheet and you will get a much more accurate picture of the true cash flow of the business.
  1. Run sensitivity scenarios – The power of your financial projection model lies in your ability to run “what if” scenarios.  First identify the key variables in your model.  Then try tweaking those variables in order to understand how they affect the model.  I usually recommend three scenarios:  base case, less aggressive and more aggressive.  Running these three scenarios will help you get a much better understanding of the range of possible outcomes.  

In the end, every business owner strives to make better, more informed decisions.  By updating your financial forecast with timely and accurate information, you are giving yourself a great decision support tool. 

About the Author:

Tom Gabbert CPA – Founder/CEO of Milestone Business Solutions

Tom Gabbert has been a pioneer and thought leader in the outsourced accounting industry since 2003. He is a successful entrepreneur who loves helping fellow entrepreneurs realize their dreams. Tom understands the unique challenges of starting, growing, and exiting a business. Not only has he done it twice himself, but he has guided numerous clients over the years through successful exits. Along the way, Tom has also helped his clients raise over $250M in growth capital (seed, Series A, Series B). He has a unique background that combines extensive financial and operational experience with a proven track record of client success.Tom is a Certified Public Accountant and holds an undergraduate degree in Accounting from the University of Notre Dame.

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