The Definitive Guide to Business Finance: What smart managers do with the numbers, Second Edition

Are you sure?

You have now made a forecast for a series of specific future periods – be they weeks, months, quarters or years. Take any one of these; say, the third quarter next year. Are you sure that sales will be 1,687 units? Of course not. If pressed on the specifics, you are more likely to predict one of the following:

• 1,690

• 1,700

• 1,690 plus or minus 10 or 20

• 1,690 plus or minus 10%

• 1,660 to 1,700 with a central estimate of 1,687 (using the worst case and best case scenarios to define the range).

There are several important messages. First, build your spreadsheets so that you can amend one number and watch how the changes ripple through to the bottom line. Second, do not let your forecasts assume spurious accuracy just because they are based ...