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How do you prepare a financial forecast you are comfortable presenting?

Posted in Finance & Economics on February 14, 2012
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Alan is the Director of Finance for a large automotive components manufacturer.  It is time to work on the three year forecast and Alan is very concerned about the first round of data coming to him for consolidation.  The company has recently hired a new Sales Director named Joe.  Joe is confident that he can increase market share faster than the company has seen historically.  Many of the investments required to achieve the sales increase have long lead-times so Alan must present a financial forecast that incorporates the growth provided, the investment/payback requirements and the bottom line effect over this growth period.  Alan is very nervous about this approach and does not feel comfortable with the numbers.  He has two weeks to come up with the first draft of the financial forecast.

  • What can Alan do to increase his confidence in Joe’s plan?  
  • What approach should he take to creating the new financial forecast so that both he and Joe are comfortable with it?  
  • Who else should Alan be working with to create a document that aligns with the goals of the entire company?

Comments (1)

SalesAddict posted on: April 24, 2012

If they hired this sales director to do great things, the Finance guy needs to be on board with what the sales guy is presenting, and so does the company President. So maybe Alan and Joe start by having a sit down with the President to understand what risk he/she is willing to accept in the plan. For example, if the President is anticipating large investments, then Alan needs to prepare this information. That being said, Joe, the sales director, needs play an active part in the presentation, getting some sort of guarantee that if an investment is made and parameters are met, the customer(s) will commit. Alan can prepare a conservative budget based on this promised growth with committed customers, while putting the unconfirmed estimate in the upside.

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How comfortable are you at preparing your company’s financial forecast?