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Financial Forecasting: What it Is, How to Do It, And Why It’s Important for Every Business

Financial Forecasting-2-1

In our personal lives, we are terrible predictors of our future selves. Uniformed, we buy houses based on a salary we believe will only increase. We buy cars thinking the price of gas will stay the same. We subscribe to memberships and services thinking we’ll always use them. We constantly seek stasis in a world that is constantly changing.

When it comes to business, why would we be any different?

Some famous business figures don’t even believe we CAN get good at prediction or forecasting. Jason Fried, Founder of BaseCamp, said, “Unless you are a fortune teller, long-term business planning is a fantasy.”

What if that weren’t the case? At our company, SRC (Springfield Remanufacturing Corporation), our monthly forecasts have proven 95 percent accurate. In fact, our most recent five-year financial forecasts proved to be 96 percent accurate.  

Don’t you wish you could have that kind of accuracy in your business forecasting? What would you need to do that? What data would you pay attention to? Who would you believe? 

Good question! The most successful organizations consistently look at the marketplace and update their forecasts accordingly. Usually, this takes the form of running to the experts.

In his book Rock Breaks Scissors, William Poundstone states, “Research argues that business and political forecasters are not much more accurate than educated non-experts. Most forecasting experts assume current trends will continue into the future. This isn’t necessarily true, but forecasters know their clients will believe it.”

In fact, Morningstar reports that 85% of mutual funds have underperformed their benchmarks. Not quarterly. They’ve missed the mark for generations. Top that with the fact that half of mutual fund managers don’t even invest in their own funds!

You’re already better at forecasting than you probably think. You’re certainly better than many of the experts. Even if you predicted the market would rise every year only by its historic average, you’d be more accurate than the annual forecasts of the top 20 market strategists from large Wall Street banks, according to writer Morgan Housel.

The fact is, anyone can get better at forecasting.



Broadly, forward forecasting is a technique or method that uses historical data to make informed predictions about the future.

Typically people arrive at a forecast by using either the qualitative or quantitative forecasting models.

The qualitative forecasting technique heavily relies on the opinions of experts to determine a final forecast. A business professional using this method would typically gather insight and data from surveys, interviews, market research, etc. to make informed predictions on their own. This method is used when no past data is available.   

Quantitative forecasting uses historical data to identify patterns and observe the way variables have interacted in the past. Often people will combine economic indicators with historical data to arrive at a more accurate forecast.



The way The Great Game of Business forecasts is a little different. Where others pull historical numbers, we use real-time data to arrive at extremely accurate forecasts using the collective knowledge of our employees. Historical data is great when building our long-term forecasts, but when looking 3 months ahead it’s crucial to arrive at the most accurate forecast to ensure the company has enough time to pivot before running into any obstacles that may lie ahead.


GIG Book single (480)-1

In The Great Game of Business, forward forecasting is the fundamental way we communicate the numbers, because we want to control our own destiny.

– Steve Baker and Rich Armstrong, Get in the Game


From our book, Get in the Game. Grab your copy today!


To do this, every single one of our employees uses the knowledge they have of our customers and vendors TODAY, paired with confidence ratings to predict the company’s revenue and expenses in extreme detail. Our people report these numbers weekly in what we call a “Huddle,” or company-wide meeting where the organization reviews financials.

Many refer to their weekly team meeting as a Forecasting Huddle. These Forecasting Huddles are a significant departure from the KPI-driven scorecards you see at many businesses and in almost every other business operating system.



  • Forecasting helps eliminate surprises. In business, no one likes surprises!
  • Forecasting ensures we remain proactive, so we don’t have to wait until the end of the month to learn how we did. We want to impact the outcome while there’s still time to make a difference.
  • Forecasting encourages employees to think about cause and effect—that is, how they can influence the numbers rather than just passively look at results to date.
  • Forecasting makes us smarter about the business. The ability to predict or forecast accurately is a direct indication of how well people understand their numbers.
  • Forecasting creates a sense of urgency, encouraging people to act and take responsibility for improving the score.



Another departure from the herd is our high-involvement approach to forecasting. We try to involve as many people as possible in contributing to the organizational forecast. Makes sense. We’re already considered to be weirdos and heretics to believe that people can learn the financials…why not believe frontline folks can learn to forecast business results?

Huddles help us proactively manage our performance and the financial results we are after. Some believe that financials are lagging measures and have no use in daily or weekly performance management. However, we use them as our early-warning system.

Imagine that the fire marshal just walked into your office and gave you a message that you never want to hear: your house has just burned to the ground. What would you do? There’s not much you can do but sift through the ashes and decide to rebuild or relocate.

Now, imagine that same fire marshal walks in and tells you that in two hours your house is going to catch fire. What would you do? You’d take action! You’d stop the fire at its source, if possible or not, you’d make sure the damage was minimized. It’s a completely different conversation, isn’t it?

Sometimes, we don’t like the message the scoreboard has to tell us, but at least we’ve got that “two-hour notice.” Ignoring the message or not taking it seriously would eventually leave us sifting through ashes. It’s not too late to save the house or at the very least minimize the damage. We just have to plan the next play accordingly.

Financial forecasting in business can be challenging, but the benefits to the short- and long-term health of the organization are tremendous.




Let’s take a look at a simple departmental scoreboard; just one way of many that you can approach a systematic way to harness the wisdom of the crowd and turn it into a reasonable forecast.

This is just one example of a sales team’s current activities. After all, everything in business starts with a credible top line – you can’t have a business if the company's not generating revenue.

In the example below, we are reflecting on a sales team’s scoreboard the department uses to arrive at a forecast of revenue. In our example, you can see columns for Customers, the “Owner” of that account, the Status of the proposal to that Customer, and the Total Potential. Simple enough.


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As the team prepares to huddle at the weekly forecasting meeting, they would need to review everything they know about each line item. What’s the latest with that customer? Do they have everything they need? What’s in the way of ‘Yes’ (or recognizing revenue from a closed sale)? What probability would they put on it this week, and why?

Many teams limit probabilities to concrete measures, e.g., 25%: contact has been made. 50%: proposal has been sent. 75%: the proposal is being negotiated/refined. 100%: SOLD!

Next, we can create a ‘Total Potential’ column, then assign it a ‘Probability’.  Multiply those together and you can estimate the ‘Weighted Probability’; the likelihood of that deal closing, and what it might be worth.


Here is the formula:  Total Potential X Probability = Weighted Potential


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Now we can divide each Weighted Potential line item by that Customer’s payment terms and plot it across the calendar, illustrating our expectations of revenue recognition, by month.

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Imagine not only forecasting sales, but costs, margins, and expenses as well. The real power of forward forecasting is harnessing the wisdom of the crowd. Line-of-sight to organizational goals gives people the ‘why’ they need to stay connected to the bigger picture. Line-item ownership breaks down what could be overwhelming, into something local and manageable for the individual.

You will be amazed at how accurate your forecasts will become with frequency.

The frequency of your forecasting is the real ‘secret’ to continuously improving forecast accuracy and results. Face it. The world of business is dynamic, and new information comes in every day. Will your forecasts change? Absolutely! And with every weekly meeting, your team’s confidence, ownership, and accuracy will increase. Meet less frequently, and your forecasts (and accountability) will erode into a low-engagement victim culture, filled with excuses, finger-pointing, and poor performance.




When you start regular Huddles and ask nonfinancial people for an opinion on how the month will end, you’re bound to hear, “How am I supposed to predict the future? What am I, a fortune teller?” It’s imperative that you teach people that “it’s not your job to predict the future. Your job is to influence it.” We’ll never be able to see around every corner, but with each forecast, we get a little smarter. A little more accurate. We seek out more information; we ask more sources.

While we might call it “poorcasting” in the beginning, it’s the discipline of keeping at it week after week, month after month, that makes us better. At SRC, our monthly forecasts have proven 95 percent accurate. In fact, our most recent five-year financial forecasts proved to be 96 percent accurate. Sound impossible? Believe it—you will get better. Just keep at it.

In business, we don’t like things sneaking up on us. So, forecasting helps us take the surprises out of business. We are not asking people to predict the unpredictable. We are simply asking them to be forward-looking and then learn what impacts their numbers. Their forecast is simply an educated best estimate or opinion on what is expected.

In the end, forecasting will help you gain a deeper understanding of what influences your numbers. Begin by identifying the few key drivers that directly influence your forecast. For example, a sales team is responsible for sales revenue, so the key drivers that may directly influence its forecast are the number of customer prospects, closure rate, number of proposals submitted, product mix, revenue per customer, customer satisfaction, sales cycle, new business, and average sale price.

Here’s how the process works.

Part of the “secret sauce” in playing The Great Game of Business is developing a consistent Huddle rhythm that includes forward forecasting your financial scoreboard by line owners—those people close to the numbers who have responsibility for reporting each line of the scoreboard.

Refer to the financial scoreboard below. The scoreboard is not a financial statement—rather, it’s a common-sense reflection of your income statement, balance sheet, and cash flow statements. Your financial scoreboard should include important data that your team wants and needs to know. During your Huddle, you’ll be keeping score on a number of scoreboards (bonus plan, MiniGames, etc.), but start with the financial scoreboard.

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Begin by having the sales team call out its revenue forecast for the end of the month. If you’re at the beginning of the month, this forecast will go in the “Forecast 1” column. Then you can work your way down the scoreboard, quickly capturing forecasts of how the month will end from people who own lines relating to COGS and expenses.



Picture going into your weekly huddle, or forecasting meeting, with your team.

You’ll be forecasting the end of the current month. So, your sales team will be updating their departmental scoreboard as illustrated above, preparing for the weekly forecast.

In reality, most sales teams will organize by product line, service line, region, location, or other natural divisions. In our example, we are consolidating the sales team’s efforts into one line, ‘Revenue’.

If we are in the first week of June, the Sales Team could forecast revenue of $61,875, knowing that in the coming weeks, we may close one deal and lose another. This forecast will go in the “Week 1” forecast column.


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Then, you can work your way down the scoreboard, quickly capturing forecasts of how the month will end from people who own lines relating to COGS and expenses.

Remember to ask for the stories behind the numbers, especially if there is a variance from the plan or budget.



Coachs Tip Chat Bubble (1)-1Our rule of thumb is that if you are above or below plan by 5 percent, you must tell a quick story, explaining the deviation and what you plan to do about it.

Jack Stack

Numbers are nothing more than stories about people.

– Jack Stack, The Great Game of Business


In a matter of minutes, you’ll have built a financial picture of how your company will look in the coming weeks. And your team understands why it will look that way. Employees can now go and take action to mitigate the negatives and lock in the positives.

The following week, you’ll repeat the process but with additional data and information available.

Data + Assumption x Frequency = Accuracy.

Your “Week 2” column should look different, as will “Week 3” and “Week 4” in subsequent Huddles. The key is that we are looking ahead instead of looking back, always with an eye on improving our month-end results.

When you reach the month’s end, you’ll cover two months in one Huddle. You’ll cover the month you’re wrapping up, plus “Week 1” of the upcoming month. In this transitional Huddle, you can reconcile your actuals with your forecast very rapidly. You’ve been looking at these numbers for four weeks now, so you can take a quick look back and then immediately throw your attention forward again.


Jack Stack

The whole idea of a forecast is projecting where you want to go and making the commitment to each other to get there. You’re not making up a number to please a boss— you’re making a commitment to take a journey together. This is a beautiful thing. An accurate forecast takes the uncertainty out of the process and sets an expectation for yourself to live up to. If you can control a forecast, you can control the world. I remember one awed CEO who, after his associates started forecasting their results, told me: “I can’t believe there is this much information inside my own company!”


– Jack Stack, The Great Game of Business


Huddle participants begin to realize that what they do behind the line items on the financial scoreboard has everything to do with what they take home in terms of job security and rewards. Huddles provide a weekly check-in on how people are tracking to their bonus payout. The bonus plan keeps everyone excited because the stakes rise at every Huddle, every forecast, every month. Remember how the bonus plan is designed. We’re always in the bonus hunt, and the rewards become greater each quarter. The prospect of sharing in the financial success of the business makes the pursuit of improvements just a little bit sweeter.



At first, embracing the practice of forward forecasting varies across team members—some take it very seriously while others devote little or no time to this critical process. Longtime GGOB coach Jack O’Riley has been a part of thousands of Huddles. He’s seen it all and has learned what to listen for to get everyone on board and effective with forward forecasting.

His first advice is not to overthink it. Don’t overcomplicate the process. Sure, you can use complex Excel spreadsheets drawing upon models such as linear regression or some modeling theory like the Monte Carlo method. Or you can simply draw upon your knowledge of the business, a little historical information, and your experience and intuition and apply all that to the numbers.

O’Riley also suggests that when you hear phrases like the following, it should alert you to dig a little deeper and ask questions of the line owner about the forecast.

“I am trying to be conservative.”
This is natural for businesspeople—but not helpful. We want to use all the knowledge available to forecast financials accurately. “Conservative” is not helpful.

“This is how much we have booked this month to date.”
If it is the last day of the month, this is fine. However, if half the month is yet to happen, then using month-to-date data will probably not prove to be accurate.

“I am being optimistic.”
This is as bad as being conservative. We are not looking for optimistic, pessimistic, or conservative. We are looking for what is likely to happen.

“I am going on last month’s results.”
Fine, if this month will be like last month. Not fine if this is used as a shortcut to a forecast. “Just use my number from last month” is probably only good if you are fore-
casting something like rent.

“Just use my number from last week.”
This sets off all sorts of alarms for a coach. Did the line owner even bother to look at the forecast for this Huddle?

“I did not have time to look at my numbers.”
Just not acceptable—this undermines the whole process. If this recurs, this person should not be part of the process.

“Just use the plan number.”
If the plan is new, then using those numbers might be appropriate. If the plan is ten months old, then defaulting to plan numbers is probably not acceptable.

“This is my best guess for now until I hear from Tom.”
Tom does not own the line and the associated forecast. The line owner does.

“I am waiting on accounting to get back to me.”
Accounting is a critical source of information but is not responsible for the forecast. The line owners need to figure out another way to forecast with the data they have for a Huddle.

This list is not exhaustive, but it’s a good representation of phrases you need to be on the lookout for in your Huddles. Other “weasel words” that indicate the person doing the forecast is trying to sidestep the responsibility and accountability include words like "sort of" and "nearly." If you hear phrases like these too often, your Huddle will sort of and nearly be useless.

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Make having effective huddles a breeze with these resources.

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While keeping score with a series of scoreboards helps us clearly determine if we are winning or losing, following the action through a series of Huddles becomes the catalyst for truly effective communication. Following the Action helps an organization close the feedback loop and reconnect, refocus, reengage, and recommit to the success of the company.

The tips below will ensure your Huddles (company-wide meetings) are most productive:

Begin with the Right Leadership

Be sure the Huddle lives up to its purpose of helping to consistently inform, involve, engage, educate, and, of course, hold people accountable for the success of the business. Remember, Huddle leaders, that Huddles are for the team, not for the managers.

Focus on the Right Scoreboard

Huddles start with a relevant and meaningful scoreboard, highlighting the right measures that clearly tell the team if they are winning or losing and who’s accountable.

Keep Your Huddles Frequent, Swift, and On Time

Maintain a simple, fixed agenda while making sure the content is relevant and the communication is concise and swift. Same day, same time, same place—every week. That way people can count on it. They can plan for it. They can develop a routine around it.

Push Back on the Pushback

The immediate pushback you will get when recommending a frequent Huddle is, “We’re too busy!” Executives can’t imagine finding the time to get everybody in the same place every week for one minute, let alone thirty to sixty. Yet this discipline will actually save you time. Teams that Huddle frequently find they interrupt each other considerably less and that productivity improves. They understand there is a fixed time when they’ll have everyone else’s attention.

Assign Employees to Small Teams

In your company-wide Main Huddles, create groups with a manager acting as the team captain to teach and coach the team during the Huddle. The small groups provide a comfortable setting for employees to get involved, ask questions, and provide input—all the things you want the Huddle process to create.

Provide a Blank Scoreboard, and Populate It in Real-Time

Give employees a blank scorecard each month to fill out so each can track, measure, and report information during each weekly Huddle. The simple act of writing the numbers down and doing a little math keeps everyone engaged and involved and has a dramatic effect on the employees’ ability to learn, understand, and remember how the numbers work together. Try it—it works.

Consider Binders

In an age of electronics, paper seems counterintuitive. But object permanence is a real thing. Consider providing Game binders to the employees that include all the GGOB information they need in order to follow the progress of The Game, including the annual business plan, Huddle scoreboards, bonus plan, a business/financial glossary of
terms, training bites, and so on. Think of it as your employees’ mobile office—a central place to store all the information they need to follow the action of The Game.

Make It Interesting ... and a Little Fun!

Provide small incentives to employees or their teams to answer questions or make calculations on the scoreboard. Include small games or brief training bites to reinforce your financial and business literacy efforts. One practitioner created Company-opoly—a customized version of the classic Monopoly game—to begin teaching the balance sheet to its teams.



Struggling to provide regular training and development opportunities to your employees?

If you're looking to make training a regular part of your company huddles but find it difficult to keep up with building training bites and lesson plans, then you need to check out our online Community!

The Great Game of Business Community hosts semi-regular training segments, called "Training Tuesdays," where they bring live, 15-minute training sessions directly to you and your people!

When the Community is in between Training Tuesday sessions, you can check out our pre-made training bite handouts to utilize during huddles or catch up on previous Training Tuesday series. We've had some great sessions on the income statement, balance sheet, and financial literacy!

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Encourage Learning

The Huddle should educate people on the business. Highlight the topics that are relevant and useful to the team. Ultimately, people want to know how they can make a difference. It’s important to always provide line of sight by making a connection between what they do every day—both individually and as a team—and the financial
outcomes of the business.

Keep in Touch with Your Strategic (High-Involvement) Plan

People support what they help create, remember? The more input you get from your team as you put your annual plan together, the more you’ll want to reconnect to it during your Huddles. But don’t just present numbers. Start a discussion about how the numbers they’re forecasting compare to the goals they previously set.

Employees, Not Accounting, Should Generate the Numbers

Employees’ efforts created those numbers, so they should be the ones to gather them. This also allows the employees to discover and understand exactly where these numbers are coming from and how their daily efforts drive those numbers.

And They Should Report the Numbers, Too

Give your employees a voice by letting them call out their own forecasts. This allows them to celebrate their successes and mourn their failures with the rest of the company. It’s such a great reminder that you’re all in it together.

Proactively Highlight People Creating “Stories behind the Numbers”

Your company’s success didn’t happen magically. There are real, flesh-and-blood people behind everything you do. Show your employees how each one of them plays a role in the company’s success by proactively seeking out stories about how the numbers were achieved. This adds an extra layer of accountability and ownership.

Always Keep It High Energy

Don’t be like Ferris Bueller’s economics teacher, droning your audience into submission. Bring the energy. Your employees aren’t going to get excited if you aren’t engaged in the process. Ask questions. Give out kudos. Show your passion for making the company a great place for everyone to work and achieve success. Remember, they’re watching you.


Screen Shot 2024-05-20 at 4.33.31 PMDownload the Huddles & Forward Forecasting Checklist at



Okay, okay. Someone out there is asking, “So what happens when the numbers look grim?”. The answer goes back to ownership of the numbers. If the CEO reports historical numbers on a quarterly basis, everyone knows that those numbers belong to him/her, and there’s nothing to be done.

Line-item ownership and accountability flip the script on that concept, as the numbers become ‘our’ numbers instead of ‘your’ numbers. Plus, by forecasting, we have time to do something to try to improve the numbers or mitigate the damage, rather than being relegated to fate.  

So instead of playing the blame game, the team starts to rally together around how they can improve the numbers – because everyone wants to win, and everyone wants to earn a bonus.


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Learn how we tie bonus programs to financial performance while forecasting the bonus pool weekly to eliminate bonus entitlement.

Get one-on-one help building a bonus plan!



Forecasting allows us to influence our own future and destiny. Whether that be career advancement, bonus payouts, or simply job security, employees are much more engaged, happy, and satisfied when they have some agency or control over their own lives.


Annual Plan and Budget Tool Scorecard


This tool is a robust scorecard built in Microsoft Excel and has everything you need to start sharing, tracking, and forecasting company financials. Plus, it also includes a bonus program tracker and scorecard.


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Topics: Financial Forecasting, Ownership Mindset

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About The Great Game of Business

Our approach to running a company was developed to help close one of the biggest gaps in business: the gap between managers and employees. We call our open-book approach The Great Game of Business. What lies at the heart of The Game is a very simple proposition: The best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run and a stake in the outcome. Let us teach you how to develop a culture of ownership, where employees think, act and feel like owners.