finance
Financial Forecast
Projected revenue, expenses, and cash for upcoming periods. The map of where the business is going.
Definition
A financial forecast projects future revenue, expenses, and cash position - usually 12-24 months out. It differs from a budget (budget = the plan; forecast = current expectation). Forecasts should be updated monthly with actual data, so the rolling 12-month view always reflects what you now know. Three-statement forecasts (P&L + cash flow + balance sheet) are the standard for businesses with outside investors or lenders; service businesses can run on a P&L + cash forecast.
In your business
- →Update monthly with actual data - rolling forecast beats annual budget
- →Build three scenarios: best case, base case, worst case - decisions become clearer
- →Compare forecast to actual every month - the variance is the lesson