Why I like financial forecasts

Most of accounting is about compliance or looking backwards

Much less is about looking forward. From a business management perspective however, I believe this is where most of the value can be gained.

Now one thing we all know about forecasts is that they are likely to be wrong. As the famous saying goes, 'Forecasting is the art of saying what will happen, and then explaining why it didn't!'

But I think it's worth the effort. I had a good apprenticeship on the benefits of forecasting as a management accountant at Tesco Stores, the U.K. Supermarket chain. I was slow however to implement forecasting in my own accountancy business, focussing more on historical management accounts and targets. It was an external consultant who introduced me to his simple forecasting model and it's something I've used ever since.

Basically its an Excel spreadsheet that I update most days and sometimes several times a day which forecasts sales, cost and profits for the financial year. So if I gain a new client or lose a client (not a regular occurrence) or put a proposal to a new prospect or have an unexpected increase in a major area of cost, these all get fed into the magic spreadsheet and out pops my new profit figure

It's great because it keeps me in control and reduces the risk of  being caught out by any surprises. Once set up it takes hardly any time to maintain and I think it is the best financial management tool I have in the business

Henri Poncaire' was a very clever man who was one of the creators of chaos theory. He said, 'It is far better to foresee even without certainty than not to foresee at all.'

If it's good enough for Henri, it's good enough for me

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