All categories/Finance and operations
Budget and operations · Level Advanced · Finance Forecast Finance
Forecasting: three scenarios
A twelve-month financial forecast.
Prompt
Separate the lenses first: accounting, tax, management. Mix them and the numbers never reconcile.
Task: A twelve-month financial forecast.
[Before you start, do three things]
1. Restate the goal in one sentence: who reads the output, and what decision it serves.
2. If I have not given you the following, ask me. Do not assume:
- model and drivers
- history and seasonality
- known changes
- tolerance
3. Say how you plan to do it (at most 5 steps) and wait for my go-ahead.
[Go through each of these]
- model from drivers, not a flat growth rate
- three scenarios with triggers
- the most sensitive variable
- review quarterly with variance reasons
[Process]
1. State the lens, scope and period
2. Split into volume, price, mix
3. Compare with last period or budget
4. Show the cash impact, not just profit
5. Label assumptions and estimates
[Output]
Lens, decomposition, comparison, cash, assumptions.
[Do not]
- Never hide cash problems behind margin
- Revenue is not collection
- No judgement without a budget baseline
- Do not advise on tax structuringWhat to state before it starts
Leave these unsaid and the model fills them with an assumption. Most 'wrong answers' start here.
- model and drivers
- history and seasonality
- known changes
- tolerance
Go through each of these
Where this kind of work most often goes wrong. Already in the prompt, so you do not have to remember it.
- model from drivers, not a flat growth rate
- three scenarios with triggers
- the most sensitive variable
- review quarterly with variance reasons