How to put financial forecasting to work in your business this year: part 3

May 19, 2015


In Part 1 of this series on financial forecasting, I walked through the PLAN phase. This phase was focused on putting the foundation in place so you can build a forecast that adds value for you and for your company.

In Part 2 of this series, I talked about the CREATE phase. This phase was about loading historical results and doing the work of developing assumptions and dropping numbers in your forecast.

Now it is time to talk about the third stage of the recipe for financial forecasting: the PRESENT phase.This phase is about turning your forecast into an effective decision-making tool. It’s about how you turn numbers into insight for your leadership team and for everyone interested in, or invested in, the financial success of your company.


Presenting your forecast is more art than science. It’s about fostering insight and creating clarity of purpose and focus. To accomplish that objective, we need to think strategically about how we present the forecast.

Here are the steps:

  • Get in their shoes
  • Simplify, simplify, simplify
  • Focus on key insights
  • Identify the implications
  • Highlight the key drivers
  • Show results side-by-side
  • Include in monthly reporting package

Get in Their Shoes

You want to put yourself in the shoes of the person you are presenting the forecast to. If you are presenting it to the Board of Directors, the approach and level of summary will be different than presenting it to the COO or the CEO. The Board isn’t involved in the day-to-day activities of the business, so they need to understand your business, and the essence of your financial forecast, without getting bogged down in too much detail.

Management needs to have a more detailed view so they can use the forecast as a tool for making specific decisions in the field.

A prospective lender would be different because they don’t have any prior knowledge or information about your company. In this case, a high-level view that highlights trends and trajectory of the key drivers of results would be helpful.

Each audience is different, so consider that in your “presentation” of the forecast results.

Simplify, Simplify, Simplify

Creating a reliable forecast and effectively communicating it to your audience starts with making the forecast as simple and easy-to-understand as possible. You have to simplify the big picture view of where the company is going financially. You have to simplify the work that you and your staff do to create and maintain the forecast, and you have to simplify how you communicate the forecast within your organization.

It seems counterintuitive on the surface. You might think that the smarter and more experienced the person you are communicating financial information to, the less you need to simplify the message. But don’t make the mistake of equating simplification with “dumbing down” the message. That’s not it at all. Communicating a financial forecast effectively requires that you simplify, simplify, simplify… then simplify some more.

Focus on Key Insights

Part of the simplification process is to focus on (and present) the one to three key insights of the forecast. There will always be a relatively few key insights that you want to communicate very clearly.

In one client, the key insight was:

Based on our growth plan for the coming year, we will need to raise between $1.3 million and $1.6 million in cash by September 1.

In another client, the key insight was:

To become current on all our payables by December 31, we need to increase this year’s revenues by 25% to $5.8 million.

That kind of focus gets the attention of your audience in a simple and effective manner.

Identify the Implications

The strategic purpose of the forecast is to help the leadership of your organization see what the current vision and strategy may look like financially. It also helps them hone in on the specific decisions that need to be made to achieve their financial plans.

Oftentimes, the forecast shows that the financial results are not what management is expecting. When that happens, you need to clearly highlight which parts of the strategy need to change in order to create the financial results everyone is striving for.

Highlight the Key Drivers

Highlighting the key drivers (in the assumptions) is a very helpful way to educate the “reader” of the forecast about what really drives financial performance. When you highlight the key drivers, you are helping your audience see deeper than just the financial statement view. You are helping them see, at a high level, what actually drives financial results and influences the financial statements.

Examples of key drivers for revenues are:

  • For a retailer, it might be number of customers times average ticket = sales.
  • For a law firm, it might be hours incurred by attorneys times average billing rate = sales.
  • For a wholesaler of fuel, it might be gallons of fuel sold times average selling price per gallon = sales.

The process of looking at the key drivers of performance is incredibly insightful. It helps the reader see the “levers” in the business that can move the needle financially.

Show Results Side-by-Side

There’s something almost magical about presenting financial results and financial statements where each month is shown side-by-side. It makes the trends and direction in the business jump off the page at you.

I always show actual months for the year next to the forecast months as a way of giving the reader a clear sense of financial trends and trajectory in the business.

Include in Monthly Reporting Package

This is a very important point. You don’t want all the benefits of having a forecast to be lost because it was looked at and then put on a shelf somewhere or forgotten. Make it a part of your Monthly Financial Rhythm. Include it in your monthly financial reporting package. That way you make it a part of how the company plans and manages the financial side of the business every month.

The Next Step

Creating the forward looking view of financial performance is a surprisingly effective way to transform the financial future of your company. It will help you:

  • Create confidence and clarity about where your business is going financially
  • Drive growth, profitability and cash flow higher
  • Provide the roadmap for turning your vision and strategy for your business into a crystal clear view of what success should look like financially
  • Enhance credibility and influence with lenders and investors so they provide the capital and support you need to grow your business
  • Help you make more confident and focused financial decisions

In short, a reliable financial forecast will help you win financially in business.

Let me know if you need any help tapping into the power of a reliable financial forecast.

Topics: Accounting & Finance

Philip Campbell

Consultant, Author

Philip Campbell is a CPA, consultant, and author of the book A Quick Start Guide to Financial Forecasting: Discover the Secret to Driving Growth, Profitability, and Cash Flow Higher. This new book provides a straightforward, easy-to-understand guide to one of the most powerful financial tools in business: a reliable financial forecast. He is also the author of the book Never Run Out of Cash: The 10 Cash Flow Rules You Can’t Afford to Ignore. The book is a step-by-step guide for business owners and managers who want to better understand and manage their cash flow. Since 1990, Philip has served as a financial officer in a number of growing companies with revenues ranging from $5,000,000 million to over $1,000,000,000. He has been involved in the acquisition or sale of 33 companies (and counting) as well as an IPO on the New York Stock Exchange. Philip loves helping entrepreneurs and business owners think strategically about the financial side of their business. His consulting work is focused on providing the financial insights that leaders need to increase profits, improve cash flow, and enjoy the fruits of financial success in business. What really sets Philip apart from the average financial person you meet is his passion and excitement about helping entrepreneurs and CEOs take control of their cash flow. In fact, early on in his career, he focused and “preached” so much about the importance of cash flow that people now call him CASH. Philip is the founder of Financial Rhythm, a website devoted to people who are serious about creating financial health, wealth, and freedom in their business. If you're an entrepreneur or business owner, Financial Rhythm is a place to get simple, actionable strategies for creating a financial future that is bigger and brighter than your past. Philip lives in Austin, Texas. You can email Philip at
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