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Q3 and your FY Forecast…

July 22nd, 2008 Comments off

     Okay, we’re only 3 weeks into Q3 and moving into the busy summer season, atleast depending on the industry that you’re in.  Hopefully, your close for the first half is also completed and you’ve had a chance to review your YTD results against the original Budget and made the appropriate updates to your Forecast.  For most of my colleagues there is a single Forecast that they play off of for the remainder of the year, and typically only the consolidated income statement, or one for each business segment.  However, have these same efforts been taken to the Cash Flow and Balance Sheets as well?

     My bigger concern at this point would be making sure that there are a number of Forecast scenarios that have been developed. While the Forecast usually incorporates the elements not known at the time of budgeting, it’s usually still an optimistic view of the current business climate. I don’t think any of my colleagues were honestly anticipating such a challenging environment, but it’s here…especially in the consumer and retail sector.  It’s also being felt by companies delivering infrastructure products that are reliant on corporate capital expenditures, which are also being scaled back.

      Does you current forecasting process include a realistic “worst case” scenario that you’ve also taken to the Balance Sheet and Cash Flow levels? Are you comfortable that you have the resources to weather such a downturn without resorting to extreme measures such as headcount reductions, capital investment reductions, and working capital management that may anger your vendors?  These may have a short-term boost but the long-term effects are harder to bounce back from.  If your “worst case” truly becomes a reality do you have good relationships with your banking contacts and have you kept in touch with them during through the year? 

       For most that I have talked to, results are modest, resources are being managed, and they are closely watching headcount, but most believe the current environment will not deteriorate further.  What if it does?  I’m still trying to dial in my crystal ball, and until I do, I’ll make sure I have Plan B…and Plan C, and Plan D.

Thanks for reading . . . .