The Mind 🧠 of a CFO

Read time: 2:30 minutes

Our last issue discussed creating a simple forecast using rolling averages from past months. That gives you a starting point — a basic picture of where your business is heading if things stay the same. But now it's time to take that forecast from "useful" to "actionable."

The next step? Start replacing those averages with real, current numbers.

When you fill your forecast with actuals, you're no longer guessing. You're working with a plan that reflects how your business is operating, which means you can make smarter decisions faster. Here's where to start:

Wages and Overtime: Get a Grip on Labor Costs

Wages are one of the most significant cash outflows for most businesses, so it's also one of the most critical areas to manage.

Start by filling in known payroll costs — salaries, benefits, payroll taxes, and other overhead. Use the average hours worked from the past few payrolls for hourly employees.

Some get concerned about overtime when forecasting. But if your business is tight on cash, overtime should not be a free-for-all. Employees shouldn't decide on their own when to work extra hours. That's a management decision — not an employee perk.

Put an approval process in place. Require employees to get permission before logging overtime. This keeps your forecast from getting blown up by surprise labor costs and allows your managers to prioritize work more efficiently.

Projects You've Closed: Add the Wins to Your Forecast

Next, add revenue from signed contracts or confirmed customer orders to your forecast.

These are inflows you can count on — and they help shift your cash flow forecast from conservative guesswork to something more accurate. We'll break this down more in the next issue.

Fixed Expenses: Fill in the Known and Predictable

Rent, software subscriptions, insurance, internet — these expenses don't change much monthly. Add them to your forecast.

Calculating total fixed expenses and payroll also gives you your break-even number: the minimum amount of cash you need each month to keep the lights on.

Future Expenses: Layer in Scenario Planning

Once you've accounted for what's already known — payroll, fixed expenses, signed deals — now you can start layering in the what-ifs.

What if you hire a new employee in June? What if your marketing spend increases by 20% next quarter? What happens if you cut Joe from the payroll?

The best way to run these kinds of scenarios is with forecasting software. I use Fathom for my fractional CFO clients because it allows us to model multiple "what-if" situations and see the impact across all three financial statements and KPIs.

That's four-way forecasting — and once you have it, you're not just managing the business. You're steering it.

Bottom Line: A forecast is only as valid as it is real. Start by replacing estimates with actuals — especially around wages, overtime, and fixed expenses — then use scenarios to model future growth or reduction plans. That's how you turn your forecast into a real-time financial strategy.

Thanks for reading, Luke Templin!

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