Building A Robust Financial Forecast in Fathom

This week I had the opportunity to meet the team behind Fathom in order to conduct a long-form video on financial forecasting. Here at RBI we utilise Fathom across all our clients to help them understand their past & present, so that they can better inform & control future results.

In the course of filming we covered the process we execute when designing, building, & maintaining a Fathom based financial forecast. The process has 5 steps - Foundation, Story, Economics, Technical, & Communication.

Foundation

Financial history is the foundation of a forecast. 

How accurate and up to date are the financial records? Do the story of the figures match reality? 

Verify the profit & loss and the balance sheet. Understanding the past and present, is what creates an ability to control for the future.

Story

Where has the business been? Where is it now? What are the goals? How is the economy?

The story informs the focus of the forecast, and leaves clues as to how to build it. 

For instance, the business is growing fast. What is the cash runway? How can it be extended? 

Economics 

What assets generate income? 

For instance, a service company buys and sells labour. The labour is the asset generating income, and the forecast should reflect this. For example;

• People employed.

• Cost and sell price per hour.

• Working days.

• Payment terms.

Technical

How to build the economics within the capabilities of Fathom? 

How to deploy rules, payment profiles, journals, schedules, adjustments, scenarios, microforecasts, taxes, quick metrics, KPIs, formulas and other functionality?

Communication

A forecast is a tool to inform decisions. Communication of the insights is paramount. 

Who are the decision makers? How do they comprehend information? Visual people may prefer charts. Others prefer a table of figures. 

If an insight cannot be understood, it cannot be acted upon.