It is no surprise that the interest rate rises have impacted Australian households, making businesses lose confidence in sales growth over a three-year period. This is why a business producing a “three-way forecast” – also known as a “three statement model” or “three financial statements” is crucial for any business to understand its stability, and financial health.
The three-way forecast is required whether your business needs reporting for shareholders, would like to attract investors or take out lending capabilities, or simply to understand and bring financial stability to your business.
The final three-way statement needs to identify the business drivers and clearly articulate and justify the assumptions that have been made in the three-way forecast. Linking together Profit and Loss Statements, Balance Sheets, and Cash Flow Projections is a task that has traditionally fallen in the realm of finance utilising tools like Excel, however to create a credible three-way forecast, additional internal stakeholders’ input is required. This is when three-way forecasting can become difficult.
With additional stakeholder input required, Excel spreadsheets containing important financial information are being hosted on internal shared drives, sent via email, and there is a possibility that different versions of the same file are being edited.
Let’s be clear. The three-way forecast can quickly become unclear.
According to Forbes, 88 per cent of spreadsheets contain errors – notably human errors. With all the complex data involved when creating a three-way statement model, simple errors such as the following can occur:
Small errors included above have severe influence on your business three-way statement model. Inaccuracies impact your profit and loss, cash statements and forecasts for the entire business.
Set your business, your financial team, your marketing divisions and sales projections up for success. Investigate technologies to assist your entire business automate tasks and minimise human errors.
At Taysols we work with large Enterprises to ensure they are fulfilling their three-way forecasting. We implement Corporate Performance Management solutions from our partners – OneStream, Oracle and Board – into multimillion-dollar businesses allowing employees and management to input, access and view financial data quickly.