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Forecasting / Planning


On December 14th 2006 the now infamous meeting of senior Goldman executives discussed the US housing market and decided it was time to put hedging strategies in place to prepare for a housing downturn given information from the controller's (back office) office. At some banks being in charge of the back office would not be much to brag about but not so at Goldman's. They place enormous value on technical expertise and the power to crunch massive amounts of data. At Goldman's the back office is treated as an equal partner for all decision making. Armed with accurate relevant financial information David Viniar, Chief Financial Officer was able to call a meeting of senior executives to discuss a serious exposure that his department had identified.

On the other hand the knives are out at Morgan Stanley who is reviewing the position of its chief risk officer following the $9.4 billion write down on sub-prime losses. By August 2007 the chief risk officer was reportedly very vocal in saying that there were no proper pricing models for the trading of structured products underpinning the mortgage advances. But by the time senior executives say they realised how dangerous these positions were it was impossible to cut them!

Goldman has just set another earnings record while Morgan Stanley and others tallied increasing mortgage losses! Whilst there is no simple answer to good or bad business performance the word on the block is that the reason other banks got into trouble with the mortgage crisis is because they do not treat the back office in the way that Goldman's do!

1- The Financial Times 22nd December 2007

How is this relevant to me?

Whilst our average client is not the size of Goldmans or Morgan Stanley there is one lesson of principle to be learned from this salutary tale.


Generating accurate management information is at the centre of effective business planning, budgeting and forecasting. The problem is that everybody wants to know how the future will pan out but most executives are not turned on by the prospect of implementing and managing such a system.

  • However getting forecasting wrong can have a devastating effect on all the stakeholders in the business, shareholders, staff, customers and suppliers alike.

  • Poor forecasting costs money, jeopardises investor and shareholder trust and limits business performance as everyone involved in the profit generating process becomes demotivated.

  • In today's increasingly uncertain business environment effective forecasting becomes even more vital!

The recent fallout from the US sub-prime mortgage crisis has renewed the focus of analysts, regulators and the providers of finance on the robustness and quality of scenario analysis performed as part of the forecasting process.

What we can do for you

The regularity of monthly reports sent out from our client managers enables us to update the now very popular monthly rolling forecast which we produce for clients as part of the monthly reporting regime.

This permits readers of the accounts and the related forecasts to view trends, opportunities and early warning signs of impending disaster many months before the events occur. The speed with which world events move can easily catch out the unwary, more especially commodity prices and currency rates.

Sample Cash Flow Forecast Report
Sample Cash Flow Forecast Report

In summary we are able to:

  • Create a forecasting model based on your specific requirements to facilitate regular updating from actual accounting data emanating from your accounting system

  • Run a rolling twelve months forecast as part of the monthly reporting regime