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Robert Seestadt, chief client officer at Apparatus Solutions shares an overview of financial forecasting and offers strategic tips for how to make key business decisions through this lens.


Financial forecasting takes past data, current trends, and key management assumptions to produce a picture of revenues, expenses, and financial position into the future.  This process is a critical element in making key business decisions.

Having the ability to look out six or twelve months can provide executives with the critical lead time needed to make decisions, consider options, and communicate operational plans with staff and board.

As a provider of accounting, CFO, and talent development services to the non-profit sector, our clients often ask us to prepare financial forecasts as part of our strategic services.  Recently, the need for “forward-looking” services has increased greatly, driven by the uncertain economic landscape, causing many organizations to revisit their fundraising and earned revenue assumptions. 

The following are four tips in preparing a strategic financial forecast:

1) Have a process, be clear in your priorities and assumptions. 

Is the forecast a one-time project?  Or something to do monthly or quarterly?  What are the key organizational priorities to reflect in the forecast process?  Survival?  Operating reserve growth?  Expanding programs to meet community needs and mission?  These priorities should be built into the forecast process to assure they are met.

Assumptions are the driving factors in a financial forecast. The best assumptions are those provided by organizational leadership, with input from “on the ground” staff.  It also helps to have your finance committee or outside professionals, such as Apparatus, challenge assumptions to provide a reality check.

Try to let your assumptions marinate for a bit.  Challenge them.  Ask for contrary opinions.  Think about the best case, worst case, most likely.

2) Separate operating activity from non-operating activity

Although restricted funds can be a source of capital for future programmatic spending, it is important to separate operating cash (“dry powder”) from cash that funders have provided for specific programmatic purposes.

Knowing which capital is truly available for spending on operations and which funds must be set aside for restricted spending is critical.  This should be addressed in the forecasting process.

3) Understand your forecast horizon and consider scenarios

Most organizations should forecast out at least 6 months, perhaps up to one year or more depending on the situation.  Longer-range forecasts, such as 3-5 years out can be great but should be combined with a strategic plan to add the most value.

For many of our clients, we recommend considering several scenarios – and one should be based on “reliable revenues”, to provide the most accurate (conservative) sense of the financial outlook.  Other scenarios to consider may include “what if earned revenues are down 25%?” or “what if we have a major facility repair?”

  1. Communicate clearly

Your audience might have a wide range of finance background and understanding.  Only having numbers on paper might be insufficient to get everyone on the same page.  Often charts, combined with a narrative recap and, if possible, live presentation and explanation of forecast assumptions, priorities, and results can go a long way to getting clarity and buy-in from all stakeholders.

While presented at a very high-level, I hope this information is helpful to your organization. The right financial forecast will allow you to look uncertainty in the eye and lay out a clear and confident financial picture to help make critical short and long-term decisions.

One last suggestion – as forecasts become history, look back and assess where your assumptions were spot on and where they failed in order to help become better at this process over time.

headshot of robert seestadt

For more information on forecasting and other rapid response needs during these uncertain times, please contact Robert Seestadt at [email protected] or see Apparatus Solutions provides specialized accounting, financial, talent, and human resources solutions for nonprofit organizations.