---
title: 6 Key Components of Financial Forecasting for Your Company's Growth
description: "Many companies follow this process: close the books, review the numbers, repeat. While reviewing company financials is an important process, you can’t change history. Check out these 6 components of forward forecasting to communicate your company financials while keeping all eyes on the target."
---

[The Great Game of Business Blog ](https://www.greatgame.com/blog)

# [6 Key Components of Financial Forecasting for Your Company's Growth](https://www.greatgame.com/blog/the-great-game-of-business/6-key-components-of-financial-forecasting)

 Written by [The Great Game™ Team](https://www.greatgame.com/blog/author/the-great-game-team) | Jan 14, 2019 9:20:00 PM

You wouldn’t drive your car while only looking in the rear-view mirror…why run your business looking only at the past? This is the method many businesses have used for decades: close the books, review the numbers, repeat. While reviewing and analyzing company financials *is* an important process, you can’t change history.

[Forward financial forecasting](https://www.greatgame.com/the-fundamentals/financial-forecasting) is a way of communicating your company’s financials while keeping all eyes on the target. **The [purpose of forward forecasting](https://www.greatgame.com/blog/the-great-game-of-business/serious-about-forward-forecasting) is not to *predict* the future, but to *influence* it.** This process minimizes surprises by having employees estimate or offer an educated opinion on what to expect.

While forward forecasting is often associated with companies who practice **open-book management**, it can (and has) been used in workplaces that don’t [share financials with employees](https://www.greatgame.com/blog/the-great-game-of-business/communicate_company_financials). The reason it is most often associated with open-book companies is because these companies typically give a high level of responsibility to the individual (or individuals) who are most closely attached to a financial number. For example, take a look at these roles and the financial number they might forecast:

***Sales Manager**: Sales Revenue*

***Janitor/Maintenance**: Cleaning Supplies*

***Scheduler**: Overtime Wages*

***Accountant**: Cash*

These individuals have direct visibility to the above numbers, know the typical patterns those numbers take and, therefore, can best predict or forecast* *where those numbers will end up based on a variety of factors.

Now that you have a better idea what forward forecasting is and why you should do it, take a look at the six key components of financial forward forecasting:

1. **The actual results** month-to-date.
2. **The forecast**: **Your best assumption based on the data you have on that number.** For example, as the scheduler, you may have an* actual *number that includes no overtime. However, assume you’re waiting for some parts necessary to complete a big order, which will create a need for overtime at the end of the month. Your *forecast* would reflect that knowledge.
3. **The risks and/or opportunities** **involved in reaching the forecast.** Perhaps you have a client that is ready to sign off on a big deal, but they must first gain approval from their legal department. Though you *forecast* that you will close the deal by the end of the month, there is risk in that projection due to uncontrollable circumstances.
4. **The actions you’ve taken to minimize the risk and maximize the opportunity**. As Jack Stack explains, *“*Your forecast is your commitment to the organization. It’s not something you throw out and hope happens. It’s your near-term vision. If you have doubts, go communicate, talk it out and take action; that’s how you beat the conditions.*”* When you forecast a number, you become accountable for moving that number along. In the example above, the salesperson might work directly with the client’s legal team to ensure the process runs smoothly.
5. **The roadblocks** that have you at a standstill with an opportunity. Two heads are better than one, right? Communicating your obstacles openly will allow others to help troubleshoot and determine alternate solutions.
6. **The actions the team can take** to help overcome obstacles. When everyone is aware of a potential loss or gain, they typically become willing and eager to help in order to ultimately get a win for the company.

In business, we don’t like surprises. Forward forecasting **encourages employees to think about cause and effect**, specifically when it comes to how they can influence your company’s numbers.

 

***Supplement your Game with financial literacy and training products from the GGOB Store.***

 

 

**Other articles you might like:**

- [4 Easy Strategies to Communicate Financials So Employees Can Understand](https://www.greatgame.com/blog/the-great-game-of-business/communicate_company_financials)
- [From $62K in Debt to a Business Worth $1.2M](https://www.greatgame.com/blog/personal-impact-of-ggob-at-king-maintenance)
- [7 Reasons Organizational Knowledge is Power](https://www.greatgame.com/blog/the-great-game-of-business/7-reasons-organizational-knowledge-is-power)

[View full post](https://www.greatgame.com/blog/the-great-game-of-business/6-key-components-of-financial-forecasting)

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