“A forecast is just that — a forecast. Put your crystal ball away; no one can see the future.”
Whichever side of the fence you’re on, the reality is that financial forecasting is often integral to strategic decision-making and managing key stakeholder relationships.
At KR8 Advisory, we’re often asked to review forecasts on behalf of lenders, investors and other stakeholders who want to understand a business’s short- and long-term prospects. Whether you’re seeking funding or providing reassurance about your long-term plan, a well-constructed forecast plays a vital role.
But not all forecasts are created equal and that’s where our expertise comes in.
The following best practices will help you turn a spreadsheet into a model that inspires confidence:
1. Your forecast should be a model, not a database
An integrated three-statement model is a self-contained financial tool (often prepared in Microsoft Excel but there are bespoke software tools available which can connect automatically with key accounting systems) that connects the income statement, balance sheet and cash flow statement through a single set of assumptions and formulas. Once the key inputs are entered, the model automatically updates all three statements, showing how those assumptions flow through to profit, cash and the overall financial position.
It’s dynamic, consistent and reduces the need for manual adjustments, giving decision-makers a clear and accurate view of how different scenarios affect the business.
If your “model” is filled with hard-coded numbers or requires manual updates every time something changes, it’s not really a model at all. It’s just a spreadsheet of numbers. Without traceability or logical links between inputs and outputs, it can’t show cause and effect.
A well-built model tells a story you can follow. Traceability means anyone can step in and see where the numbers come from. That transparency builds confidence.
2. Get the basics right
It might not sound glamorous, but the fundamentals are what make a model trustworthy. Before you start tweaking assumptions or stress-testing scenarios, make sure your starting point is solid. At the end of the day, you want your model to stand up to scrutiny.
Opening balances: Double-check cash, receivables, payables, debt and equity. If the starting point’s wrong, everything else falls apart.
Balance sheet balances: Assets must equal liabilities plus equity at all times — no exceptions.
Cross-statement consistency: Net income should flow into retained earnings, and cash on the cash flow statement must reconcile with the balance sheet. Where possible, consider producing an accompanying receipts and payments cash flow forecast so the closing cash balance is a calculated output, not just a balancing figure. This approach provides a more transparent view of cash movements and strengthens the integrity of the model.
Formula sanity: Totals and subtotals should add up, signs should be consistent and circular references should be controlled.
3. There is such a thing as “too much detail”
It’s all about balance. Your model should clearly show what’s driving future performance, not bury the story in minutiae. Too little detail, and it’s vague; too much, and people get lost in the weeds.
Know your audience. A bank or investor won’t care about every tiny line item — they want to see the big drivers: revenue streams (by segment, geography or product line), major costs and other assumptions that impact cash flow, like working capital and capital expenditure. Tailor the level of detail to what your audience actually needs to make informed decisions.
Make it flexible. Your model should let you adjust the levers that really matter — sales growth, pricing, margins, capex, funding — so you can test scenarios and see how changes flow through the business. A static spreadsheet won’t cut it; decision-makers need to see the “what ifs” in action.
Keep it clean. Endless tabs and superfluous worksheets don’t make a model more impressive, they make it harder to follow. Streamline, label clearly and make it easy for someone else to navigate.
Think of it like a map: you want enough detail to navigate, but not so much that it’s cluttered with every street and landmark.
Summary
A forecast is only as good as the model behind it. Focus on the fundamentals, highlight the key drivers and keep it clear and flexible. That’s what turns numbers into a tool stakeholders can trust. Done right, your forecast becomes more than a spreadsheet, it becomes the roadmap that helps your business secure support and make confident decisions.
At KR8 Advisory, we don’t just review models, we help build them too. Our team provides hands-on financial modelling support, helping businesses test and refine dynamic, traceable models that stand up to scrutiny. Whether you need a short-term cash flow tool or a fully integrated three-statement model for longer-term planning, we can help you create a forecast that gives clarity to management and confidence to stakeholders.
