Do I need a CFO? · Section 2 of 4
Forecasting & planning
Do you know what next quarter looks like?
1What it is
A forecast is not a prediction. It's a written-down set of assumptions — how many customers, at what price, with what costs — that you compare to reality every month so you learn which assumption was wrong and fix it.
Without one, every miss is a surprise and every decision is a guess. With one, a hire becomes a line you can see the effect of, and a slow quarter is a scenario you already ran.
2The signs you need help here
- There's no budget, or there is one and nobody has opened it since January.
- Revenue targets are last year plus a percentage, not built up from customers or capacity.
- You've never modeled what a 20% revenue drop would do to cash.
- The forecast is updated once a year, if at all, and lives in one person's head.
3What a CFO does about it
- Builds an annual operating plan bottom-up — drivers, not a growth rate — and re-forecasts it monthly.
- Runs budget vs actual every month and explains the variance in a sentence, not a spreadsheet.
- Keeps a rolling 12-month view so November doesn't feel like the edge of the world.
- Models the downside on purpose, so the plan for a bad quarter exists before the bad quarter.
4What you can do yourself this month
- Write next quarter's revenue as customers × average sale, or hours × rate, or units × price. That's a driver model.
- Put the plan beside actuals every month, even if the plan is rough. Ask what moved.
- Run one scenario: revenue down 20% for two quarters. Where does cash go? What would you cut first?
5Practice — 9 questions
Every question the quiz can ask about this. Answer each to see the CFO's read behind it and how your answer scores.
1.Do you have a budget or plan for this year?
2.How close was last year's plan to what actually happened?
3.When you decide to hire, what do you look at?
4.How do you set next year's revenue target?
5.Do you know what would happen to cash if revenue fell 20% for two quarters?
6.How often is the forecast updated?
7.Who owns the forecast?
8.When the numbers miss the plan, what happens?
9.Could you say what next quarter's revenue will be, within 10%?