Cash flow · 1 min read · Published
A forecast isn't useful because it's accurate
By Chris Greco, Founder and President.
A forecast is not useful because it is accurate. It is useful because management knows what would make it wrong, and has already decided what to do when it is.
The week-7 dip on a forecast is not a prediction. It is a statement: if the largest customer pays at 52 days and the trucks arrive on schedule, cash goes negative for two weeks. Management can now push the delivery, call the customer, or draw the line, five weeks early.
Judge a forecast by the assumptions written in the margin and by whether anyone reads the variance on Monday. Accuracy follows from that. It does not replace it.
Where this applies
Chris Greco
Founder and President, CFO Anywhere. CFO for owner-led companies since 2002. Executive MBA, Gies College of Business, University of Illinois.
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