Why your financial forecast isn't driving action

Despite my fancy finance degree, I didn’t know the first thing about financial forecasting when I graduated…

12 years ago I accepted my first finance job out of college and quickly realized I had a head full of theory with no real finance skills:

• Black-Scholes option pricing model

• Foreign exchange rate concepts

• Using SAS to do something I’m still not sure I understand

• How to calculate the return of an asset in perpetuity

I can safely say that none of this was helpful in the last 12 years of my career.

Which means everything I learned about creating great forecasts and driving the business forward with them I had to learn on the job.

Hopefully I can save you some headache and just teach you my full forecasting process.

Let’s jump in!

The root cause of a bad forecast

Your forecast should be more than just an exercise - it should be a tool that drives business decisions and influences strategy.

Yet, too often, finance teams put significant effort into forecasting, only to see their insights get ignored or overlooked by leadership.

Whenever my forecast isn’t driving action, I know I’m violating one of two principles:

1. Ensure it’s accurate – A forecast that isn’t rooted in reality can’t be trusted.

2. Use it for accountability – If leadership can’t use it to assess business opportunities, it’s just another report collecting dust.

Anything short of optimizing for both is borderline negligence in an FP&A role.

Here’s how to ensure your forecast is both accurate and actionable, step by step:

Step 1: Create a Forecast Calendar That Aligns With Key Deliverables

A financial forecast is only useful if it’s delivered at the right time to influence decision-making. Your forecast calendar should align with key moments when leadership is making critical business decisions, such as:

• Board meetings – When major strategic decisions are being made.

• Executive leadership team (ELT) meetings – Where high-level operational discussions take place.

• Budget due dates – Ensuring forecasts align with long-term financial planning.

• Quarterly earnings reviews – Providing timely updates on financial performance.

If your forecast updates don’t match leadership’s decision-making rhythm, they won’t be as impactful.

Step 2: Define Clear Update Cadences and Assumptions

Within your forecast calendar, you need to determine exactly what assumptions will be updated and how often. The best way to do this is to set clear expectations with stakeholders upfront.

• Monthly Updates: Key revenue drivers, key expense accounts, hiring plans.

• Quarterly Updates: Long-term strategic initiatives, product launches, major investments.

• Ad-Hoc Adjustments: Significant business changes (new market entry, unexpected cost spikes, etc.).

By making your assumptions and update process explicit, you remove ambiguity and ensure consistency in how forecasts are developed.

Plus, you can sequence your analysis to feed into your forecast updates.

Step 3: Build Shared Ownership With Business Leaders

Forecasts aren’t just a finance team deliverable - they should be a collaborative effort between finance and business leaders.

The most effective forecasts are those where leadership feels a sense of ownership over the numbers.

• Work closely with sales, operations, and department heads to gather input on key assumptions.

• Get their buy-in on forecast updates before presenting final numbers.

• Position the forecast as jointly developed that helps the business navigate future challenges, not just a finance exercise.

When business leaders feel a stake in the forecast, they are more likely to trust and act on the insights.

Step 4: Use Your Forecast as a Benchmark Against Actuals

Your forecast is only as good as your ability to measure it against reality. That means:

• Every monthly close, compare actuals to forecast to understand where things are tracking differently.

• Identify the biggest variances and determine whether they are one-time anomalies or signs of a shifting business trend.

• Maintain a forecast accuracy tracker to monitor how well projections align with results.

Not only does this create accountability in the forecast process, it’s improves future forecasting by making adjustments before problems escalate.

Step 5: Document and Analyze Forecast Misses

Every month, you should be logging your forecast misses in a structured way. This helps you identify patterns and root causes, allowing you to continuously refine and improve.

• Track the size and direction of misses (over-forecasting vs. under-forecasting).

• Identify recurring problem areas (e.g., sales pipeline estimates consistently off by 10%).

• Dig into root causes (e.g., was it a bad assumption or a change in market conditions?).

By analyzing misses over time, you create a feedback loop that strengthens your forecasting process and helps fine-tune accuracy.

Step 6: Have a Monthly Forecast Review With Business Leaders

One of the most important (yet overlooked) steps in making a forecast actionable is having regular discussions with leadership about variances and what they mean for the future.

• Explain deviations: Help leadership understand why actuals differed from forecast.

• Contextualize business impact: What does this mean for growth, expenses, or strategic plans?

• Decide on next steps: Should the forecast be updated? Is it a temporary blip or a fundamental shift?

These conversations are where forecasts transform from a static report into a strategic decision-making tool.

Step 7: Update the Forecast or Log Risks & Opportunities (R&O)

After reviewing variances, you have two paths forward:

• If you’re on-cycle for forecast updates, revise assumptions accordingly. Or you can add the potential forecast update to an R&O if you aren’t sure.

• If you’re off-cycle, log it as a risk or opportunity (R&O) so leadership is aware of potential future shifts.

The key is to keep leadership informed without creating forecast volatility. Not every variance requires immediate updates, but all meaningful shifts should be documented.

Step 8: Regularly Evaluate Your Forecasting Process

The best FP&A leaders don’t just focus on getting the forecast right—they focus on getting better at forecasting over time.

Ask yourself:

• Are we making consistent forecasting errors in certain areas?

• Are there leading indicators we should be tracking more closely?

• Are we engaging with business leaders effectively or just handing them numbers?

Your forecasting process should be a system, continuously evolving to reflect new data, insights, and business realities.

In summary:

Your forecast should serve 2 purposes: accuracy and accountability.

The worst FP&A teams don’t attempt either with any effort.

Okay FP&A teams will optimize 1.

The best will focus on both of them.

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