Glossary
Three-way forecast
One model linking profit and loss, balance sheet and cash flow, so a change in any one flows through the other two. The format banks trust.
In plain English
A three-way forecast joins the three financial statements into a single linked model. Sell more and the profit and loss improves, debtors rise on the balance sheet, and cash arrives later in the cash flow. The linkage is the point: profit and cash are not the same thing, and the three-way is how the difference is made visible.
A profit forecast on its own can look healthy while the business quietly runs out of cash, because growth consumes working capital before it returns it. The three-way catches that. It is the difference between forecasting profit and forecasting survival.
Why a lender cares
Banks ask for three-way forecasts because they lend against cash, not accounting profit. A forecast that balances, links properly and states its assumptions reads as management that understands its own machine. Ours are built lender-grade, with the assumptions evidenced and the covenants tested inside the model.
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