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What-If Forecasting Model for Accountants
- Feb 24
- 3 min read
How to build your first What-If Forecasting model for a client.
Growth-oriented entrepreneurs are asking questions, like: What if sales drop by 10%?
What if we hire a new employee? What if we invest in new equipment?
Traditional accounting shows what has already happened. A what-if forecasting model shows what could happen. It combines accounting data, the entrepreneur’s plans, and the accountant’s expertise into one practical decision-making tool.
In this article, you’ll learn:
What a what-if forecasting model really is
Where accountants should start
How to build your first what-if model
The most common mistakes
How to develop the model further
What Is a What-If Forecasting Model?
A what-if forecasting model is a financial simulation where you change one or more variables and immediately see how it impacts key metrics such as:
Revenue
Profitability
Cash flow
Financing needs
A what-if model is not a budget. Because it directly answers the entrepreneur’s real questions, it becomes a decision-making tool, not just a report.
Where to start (your first version)?
The best way to build a what-if model is together with your client. That way, you create a practical model that answers 1–3 of his/her most important business questions and brings instant value to your client.
Step 1: Choose 1–3 key questions
Start with concrete decision points:
Should we hire a new employee?
Will our cash last six months if a new customer has 60-day payment terms?
What happens if sales decline by 15%?
Can the company invest €80,000 in new equipment?
Keep the first model focused: 1–3 questions only.
Step 2: Use the previous year’s actuals as your base plan
You can start from scratch, or use a previous financial year as your base. Using historical accounting data makes the model realistic, saves time, and avoids rebuilding every single account manually. Use historical data as a baseline and edit it with percentage changes, or build projections using unit prices and volumes if that’s easier.
Step 3: Create 1 - 3 different scenarios
Keep your first model simple, like
Forecast A = Base scenario, meaning the current trend continues
Forecast B = The best case scenario, meaning for exmple 20% sales growth
Forecast C = The worst case scenario, meaning for exmple 20% sales decline
Update the model and instantly get answers to the impact on the next months, like:
How much does the profit improve or decline?
How much cash will be at the banks?
When the break-even point is reached?
Go through the numbers with your client and make sure s/he understands the implications. This is important, as the clarity builds confidence.
Tip: Once your basic model works, expand it by testing pricing changes, payment terms, and loan repayments to see their real impact on profit and cash flow. At this stage, the model becomes an ongoing advisory tool, not just a calculation.
The most common mistakes
1. Overcomplicating the model: Your first version doesn’t need 15 variables. Focus on the 1–3 that matter most.
2. Changing too many variables at once: Adjust one variable at a time and review the results with the client.
3. Ignoring cash flow and cash at banks: Many businesses fail because of cash flow, not because of profit or balance sheet issues.
4. Not comparing forecast to actuals: A forecast is a living tool, not a one-time report.
Take the First Step Today
If you want to get started immediately:
Book a 45-minute meeting with your client
Select 1–3 key business questions
Use a previous financial year as the model base (or start fresh)
Build three what-if scenarios
Review the results together
Your first model won’t be perfect; it will still shift your role to a strategic financial partner.
Want to automate What-If analysis?
With riskrate automation tools, your first What-If analysis based on the profit, balance forecast, and cash flow forecast can be generated in just a few clicks. Book a free 30-minute meeting with our team, and we’ll walk through how you can implement what-if forecasting in your own accounting practice.
Report with a click.
