Every meaningful business decision rests on some kind of forecast - what revenue will look like, what expenses will grow to, how cash will track. Forecasts that are revised monthly are useful; the ones that aren't are fairy tales.
Definition
Forecast - a projection of future business performance (revenue, expenses, profit, cash) based on current data, historical patterns, and explicit assumptions about what will change. A prediction, not a commitment.
Common uses
- Decision support - can we afford this hire, this investment, this expansion?
- Cash flow planning - 13-week rolling forecast catches cash crunches early
- Scenario analysis - building multiple forecasts under different assumptions
Watch out
A forecast without explicit assumptions is just numbers. When reality differs, the diagnosis is "which assumption was wrong" - and that's only answerable if assumptions were stated.