Six tips from accounting experts to level up your approach to forecasting

Forecasting can sometimes feel like an endless guessing game, especially when you're piecing together numbers using various spreadsheets.

The 10th edition of The Exchange is all about making forecasting work for you and your clients - not against you. We've gathered insights from six industry experts on common challenges and practical solutions. From dealing with cash flow timing to staying agile with scenario planning, here's a roadmap to turn forecasting from a chore into a strategic advantage.?

1. Make forecasting a regular part of planning?

Too often, forecasting is treated as a once-a-year exercise—if it's done at all. However, businesses hugely benefit from treating forecasts as living documents that reflect current goals and resources. Stephen Paul emphasizes this, noting that "most business plans start with a cash flow projection, but as the business grows, those plans and forecasts are rarely updated on a day-to-day or week-to-week basis." By making forecasting a routine activity, you help clients stay on top of their financial situation and plan proactively.?

Tip: Encourage clients to revisit their forecasts quarterly, if not monthly. By keeping forecasts up-to-date, businesses can adapt faster to new opportunities, risks, or changes in the market. You might find that tools like Fathom make this easier by providing real-time updates, but the main point is consistency—having a reliable process for checking in on finances.?

2. Don't just look at profit—cash flow is key?

Profit may look good on paper, but as Sadie Channing advises, "Profit doesn't equal cash." Many businesses focus only on profitability, neglecting cash flow, which is the real measure of a business's ability to survive and grow. Cash flow forecasting helps clients prepare for unexpected expenses, seasonal lulls, or large projects by showing them how much cash they'll have on hand when needed.?

Tip: Help clients consider cash flow beyond sales and expenses. Consider future liabilities like tax payments or planned investments, and make cash flow tracking a regular part of your forecasting conversations. By visualizing cash flow trends, your clients can better anticipate shortfalls or excess cash and plan accordingly, whether saving for future needs or exploring growth opportunities.?

3. Make the numbers clear and understandable?

Many clients are experts in their own fields but need to be more comfortable with complex spreadsheets. Alicia Williams says, "Many businesses are amazing at what they do, but they're not accountants." Using charts, graphs, and visual trends to display financial information helps clients see patterns and spot risks without getting bogged down in raw numbers.?

Tip: Work with clients to create visual reports summarizing key financial trends. Even simple visuals can make a huge difference in how clients interpret and act on financial information. For example, a graph showing declining cash flow might be the nudge a client needs to reassess spending, chase down overdue invoices, or prepare for upcoming costs. This approach saves time and helps them make quicker, more informed decisions.?

4. Plan for 'What If' scenarios?

Business owners often rely on their "gut" when planning, but gut feelings aren't always reliable. Erica Goode, CPA has seen the difference that realistic, data-driven scenarios make: "I use micro-forecasts to show clients what their cash flow could look like if things go exactly as planned—or if they don't." This approach gives clients a clear understanding of best-case, worst-case, and 'everything in between' scenarios.?

Tip: Build multiple scenarios with your clients, reflecting optimistic and challenging situations. For example, you could create a scenario where a major customer is lost alongside another where revenue exceeds expectations. These comparisons provide peace of mind and help clients think through potential responses. When changes do happen, they'll be ready to pivot with a plan in place rather than reacting on the fly.?

5. Encourage forward-thinking, even in uncertain times?

It's tempting to play things safe during times of uncertainty, but planning ahead, even in unpredictable conditions is crucial. Cheryl Sharp FCCA noticed that, during COVID, many business owners shifted to a forward-thinking mindset, realizing they needed to prepare for anything. This proactive planning approach has continued to serve them well despite uncertain economic conditions.?

“COVID was the first time many business owners really faced uncertainty on a larger scale. After going through it, they’re now more forward-thinking, understanding that planning gives them the certainty to handle whatever’s coming down the line.”

Tip: Help clients map out their growth plans while making room for unexpected bumps in the road. Businesses can visualize the impact on their finances over time by planning for milestones like hiring, investing in equipment, or launching new products. Encourage them to use a "roadmap" approach, assessing the financial impact of significant decisions while monitoring potential risks.?

6. Manage cash flow timing as a safety net?

Cash flow timing is often more challenging than clients anticipate. Keila Hill-Trawick, CPA, MBA notes that the timing of inflows and outflows can make or break a business, especially if expenses don't align with income. Many small businesses fail because they don't have cash on hand at critical times—not necessarily because of low revenue or high expenses.?

Tip: Advise clients to regularly track inflows and outflows, especially for seasonal or cyclical businesses. A simple strategy, like setting aside cash for future expenses in a dedicated account, can help smooth out rough patches. Encourage clients to plan for significant payments ahead of time and review their accounts payable and receivable timelines to avoid surprises. Tools with real-time cash flow tracking can simplify this process, but consistency in tracking is what really makes a difference.?

Bonus tip: building confidence through consistency?

Erica Goode advocates that consistent forecasting isn't just about the numbers—it's about building peace of mind. Helping clients understand best and worst case scenarios gives them the confidence to move forward without constantly worrying about the financial "what ifs." This confidence means they can focus on bigger goals rather than reacting to crises or scrambling to catch up.?beets is a great tool, but it has its limitations. By adopting more visual and consistent methods, you're empowering clients to see the bigger picture, make data-driven decisions, and feel confident in their financial future.?

??See you next time,?

Team Fathom?

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