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Dear CEO, Most Forecasts Will Be Wrong. That Is Exactly Why They Matter.
- May 24
- 6 min read
Most forecasts will be wrong, and that should not surprise anyone who has ever had to manage a real organisation through real conditions.
They will not be wrong because the finance team is weak, or because the model is broken, or because the market has somehow become more chaotic than every other market. They will be wrong because a forecast is always a disciplined estimate, built from the information available at a point in time, while customers, funders, staff, suppliers, governments, technology and cashflow all continue to move.
The issue is not that forecasts miss. The real issue is that too many leadership teams still treat the forecast as a promise, rather than as a working tool for judgement.
They use it to create comfort. They use it to signal control. They use it to hold the board’s confidence for one more month. They use it to avoid the more difficult conversation, which is that the assumptions may have shifted and the organisation may need to respond before the financial statements make the problem undeniable.
That is where the damage usually begins.
The forecast is not the truth, it is the test
A forecast should never be treated as the final word on the future. It is not a certificate of certainty. It is a test of what leadership currently believes to be true.
That distinction matters enormously, because once the forecast is treated as the truth, people start defending it instead of learning from it. The original budget becomes a line in the sand. The board papers become an exercise in explaining variance rather than examining cause. The finance team starts smoothing the language. The executive team keeps repeating numbers that everyone privately suspects are already out of date.
The better approach is more honest, more useful and much more commercially mature. The forecast should be saying, “This is what we believed when we built the model. This is what has changed since then. This is what still holds. This is what no longer holds. This is where we now need to make a decision.”
That is the point at which forecasting becomes useful, because the organisation is no longer trying to preserve the appearance of control. It is using finance to improve the quality and timing of its choices.
The annual budget is not enough
There is still a tendency in many organisations to treat the annual budget as though it carries some moral authority. It is approved, loaded into the system, reported against for twelve months, and often defended long after the assumptions underneath it have materially changed.
An annual budget has its place, particularly for discipline, accountability and governance. But it is not enough on its own, particularly for organisations operating with funding pressure, workforce constraints, margin sensitivity, debt exposure, growth risk or material dependence on a small number of customers, contracts, donors or programs.
A static budget can tell you where you expected to be. A good forecast should help you understand where you are now likely to land, what has changed, and what decisions are still available before the organisation runs out of room to move.
This is where many finance functions either become valuable or become administrative.
If finance is simply reporting that actuals are different from budget, it is describing history. If finance is identifying the assumptions that have changed, the risks that are building, the cash impact that is coming, and the choices available to management, it is contributing to leadership.
Courage in finance is not drama, it is honesty
Brené Brown’s work is relevant here, although not in the soft way people sometimes assume when they bring courage into business conversations.
Courage in finance is not about being dramatic, emotional or confessional. It is about being willing to tell the truth while there is still time for the truth to be useful.
For a CEO and CFO, that means being able to say: “This is what we believed three months ago, this is what changed, this is what no longer holds, and this is what we now need to do.”
That conversation can be uncomfortable, especially when a board has approved a budget, a lender has received a forecast, or a leadership team has publicly committed to a number. But discomfort is not the same as failure, and changing a forecast when the facts have changed is not a loss of credibility.
The greater risk is pretending the model still reflects reality when it clearly does not. A forecast that is updated early gives leadership options. A forecast that is defended too long often leaves leadership with reactions.
Future-proofing is not prediction
Future-proofing is not about pretending you can predict the future with precision. It is about building enough financial and operational visibility to respond before the cost of delay becomes too high.
Amy Webb’s work on strategic foresight is useful for this reason, because it is not built on the fantasy that leaders can know exactly what is coming. It is built on the discipline of watching signals, mapping implications and preparing for more than one plausible future.
That thinking belongs in finance.
A CEO should not be asking the CFO for one perfect number that removes uncertainty. A board should not be asking management to make ambiguity disappear. Better to talk about about what could plausibly happen, which assumptions are most exposed, what indicators should be watched, and what decisions would need to change if conditions moved in that direction.
The questions that should sit behind the numbers
A good forecast should force better questions, because the number itself is rarely the most important part of the conversation.
The real value sits underneath the number, in the assumptions, dependencies and pressure points that determine whether the forecast is still credible.
The questions I would want leadership to ask are practical ones:
Which assumptions in this model are facts, and which are really just hopes with numbers attached?
Which revenue lines are most exposed to timing delays, customer behaviour, funding changes or external pressure?
Which costs are genuinely fixed, and which only look fixed because no one has challenged them properly?
Where is cash likely to tighten before profit shows the full picture?
Which parts of the organisation are relying on volume, pricing, utilisation or funding assumptions that may no longer be safe?
What would we do now if the downside case became the most likely case?
What decision are we delaying because the current forecast still gives us permission to wait?
Those are not theoretical finance questions. They are management questions, and they often separate organisations that retain control from organisations that slowly drift into constraint.
Inflection points usually arrive with signals
Rita McGrath’s work on inflection points is also highly relevant, because it challenges the comforting idea that disruption simply appears from nowhere; in most cases, the signals come first:
Customer behaviour starts to shift
Funding conditions tighten
Staff expectations move
Margins begin to compress
Donor sentiment changes
Technology shifts alter what good service delivery looks like
A once-reliable revenue line becomes harder to defend
A cost base that used to be manageable starts absorbing too much of the organisation’s flexibility
The problem is not that these signals are always invisible. The problem is that they are often inconvenient. A strong leadership team notices the signals while there is still time to act. A weaker one waits until the lagging indicators have turned red, then describes the outcome as unexpected.
Forecasts will be wrong, but they should still make you better
So yes, forecasts will be wrong - Mine have been wrong too, and I expect they will continue to be wrong, because the world does not conveniently stay still once the excel model has been approved.
The real test of leadership is not whether yesterday’s model was perfect. It is whether the organisation noticed the change early enough, understood what it meant, and had the discipline to act before the decision was made for it.
That is what good forecasting is meant to do: it does not give you certainty, but it does give you a better chance of making the right decision before the expensive one becomes unavoidable.
How Diamond Advisory helps
Diamond Advisory works with CEOs, boards and leadership teams that need clearer financial visibility, stronger commercial discipline and better decision support.
For organisations that have outgrown static budgets, delayed reporting or finance packs that explain the past without helping management make better decisions, a fractional or interim CFO can bring the structure, judgement and financial clarity needed to manage what is actually happening, not just what was expected to happen.
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