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Fractional CFO Tips for Creating a Financial Forecast

Posted by Joerg Joergensen on Jan 1, 2020 7:45:00 AM
Joerg Joergensen
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It’s important to live in the moment, but successful companies must also predict their future. A fractional CFO is a valuable asset to any management team that depends on a sound forecast to make critical business decisions for the next quarter, year, and beyond.

The following is an excerpt from our webinar, Top 10 Outsourced CFO Quick Wins. If you’re one of the many firms that are considering offering outsourced CFO services, this webinar will help you learn your client’s business quickly, forecast the future, and make a fast impression.

Fractional CFO Tips for Creating a Financial Forecast

What’s the Purpose of a Financial Forecast?

Unlike a crystal ball, a financial forecast uses sound, current data to provide a basis for tomorrow’s business future. It can tell a story of growth, decline, or disruption, but allows a management team to make data-driven business decisions, including if they need or how they will use potential investor funding. As an outsourced CFO, you’re uniquely qualified to put together a forecast that helps the executive team make these decisions.

The forecast is based on a set of assumptions about customers, revenue, competitors, market factors, regulations, and other issues that will impact revenue, expenses, and the overall viability of the business.

These assumptions, along with calculations, paint a picture that answers essential questions like, do we need more employees? Will we need additional funding? Will we be able to expand operations - or just break even? The financial forecast is a key ingredient in helping the management team decide which way to steer the business.

What Time Frame Should the Forecast Include?

Financial forecasts are flexible, covering the time for which decisions must be made. For short term decisions, a 30-, 60-, or 90-day forecast of revenue, expenses, budgets, and cash flow may be sufficient. 

For longer-term decisions that include business expansion, capital projects, hiring staff, or determining rounds of funding, a long term forecast of 1, 3, 5 years or longer may be required, with estimates based on assumptions from your unique, fractional CFO perspective.

How Should a Forecast Be Presented?

Traditional tools like Excel spreadsheets are still a favorite of most accountants and business leaders. If your accounting system has more robust reporting features, you can use those reports as well.

Projected financial statements still provide the best information for the management team. The balance sheet, P&L, and cash flow statements are still readily used, along with budgets and supporting spreadsheet analysis.

Remember, the overall intent is to craft a sound story of what the business will look like based on your assumptions and calculations. The management team is looking for your expertise to help them determine the right path for the company’s future.

Ready to Learn More?

For more tips on how to make an impact as an outsourced CFO, watch the webinar recording, Top 10 Outsourced CFO Quick Wins, and leave us a reply below your comments.

Top 10 Outsourced CFO Quick Wins | Watch the Recording

Topics: Outsourced CFO

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