Forecasting scenarios: the compass that guides you through the new challenges of global markets

In an increasingly unpredictable economic environment — marked by recurring global “black swan” events such as pandemics, conflicts, inflationary pressures, technological innovations, and tariffs — it has become essential for companies and professionals to look beyond historical financial statements. Analyzing the past is no longer enough; anticipating the future is now imperative.

The need to forecast the impact of various business variables, understand future financial sustainability, and ensure access to credit is becoming more complex for companies of all sizes. Creating a solid business plan requires time, specialized skills, and innovative technological tools capable of managing and simulating complex, realistic scenarios.

It is precisely to address these strategic needs that modefinance has developed Forecasting Scenarios, an advanced solution designed to support entrepreneurs, CFOs, banks, consultants, and professionals in understanding and addressing critical decision-making challenges. Every day, these figures face crucial questions such as:

• What is the impact of rising operating costs on the company’s financial structure?
• What happens if market demand suddenly drops?
• Are the forecasts consistent with the current market situation and the company’s available resources?
• How resilient is my business model to economic shock?

With Forecasting Scenarios, these questions are answered through data-driven insights, consistent simulations, and a reliable forward-looking perspective, providing a solid foundation for effective strategic decision-making and reducing operational uncertainty.

Forecasting Scenarios by modefinance is an advanced forward-looking simulation tool that enables users to explore the impact of various contextual variables on business performance in the medium to long term. It provides projections of the income statement, balance sheet, and cash flow statement, as well as key economic-financial metrics.

Through an intuitive interface — usable even by those without specialized knowledge in financial modeling — users are guided through the necessary data entry process. The only required input is the projected revenue (see question below), while all others are optional:

What is the estimated total revenue, either as an absolute value or as a percentage change from the previous year, considering expected changes in pricing and production/sales volumes?

The ability to freely define which financial and economic drivers to adjust makes the model highly flexible and customizable.

This way, users can numerically translate their business strategy by answering simple questions only for those areas of financial statements they consider key for the forecast simulation:

• Operational management (e.g., revenue, raw material costs, services, personnel, leasing)
• Non-operational management (e.g., extraordinary income/expenses, IRES and IRAP taxation)
• Working capital (e.g., DSO, DPO, DIO, average VAT rate)
• Investments (e.g., purchasing or disposing of buildings, machinery, equipment, software, R&D, equity investments, fixed financial assets, or loans granted/received)
• Finance (e.g., cash outflows for loan repayments or dividend payments, or inflows from new funding or paid-in capital increases).

Users can test the impact of alternative assumptions by simply adjusting a few drivers. Possible scenarios include: what happens if raw material costs increase by 10%? Or if customers delay payments (higher DSO)? Or if a significant investment (CapEx) is made? By simulating these changes, businesses and professionals gain a clear view of how these variations affect not only profit and loss but also cash flow and net financial position.

If the user only enters revenue assumptions, the algorithm can estimate the remaining inputs based on the company’s historical financials, making the tool usable even for less-structured strategies.

Once the inputs are validated, the system generates projected financial statements over a three-year horizon, offering a comprehensive view of the company’s evolution under the assumed scenarios.

What sets Forecasting Scenarios apart is not only its precise simulation of financial statements but also its calculation of essential metrics and statistics:

• Summary dashboard: Provides a snapshot of key economic, financial, cash flow, and liquidity indicators.

• Projected cash flow statement: A vital tool for understanding how cash will be generated or absorbed over time — helping assess whether the company’s revenues will cover its expenses.
• Summary of scores: Alongside traditional financial indicators, proprietary modefinance models are calculated and displayed: the MORE Score (credit risk rating) and the Cash Flow Score (cash generation capacity).

In practice, Forecasting Scenarios supports operational and strategic activities by enabling you to:

• Anticipate financial needs: Identify whether new funding will be needed and for what duration (e.g., medium-long term to finance investments).
• Evaluate debt sustainability: Verify if the company will be able to meet its financial commitments, allowing for early corrective actions (e.g., optimizing working capital to avoid excessive, unsustainable debt).
• Guide strategic decisions: Use projections to choose the best time horizon for planning investments, reducing inventory, etc.
• Obtain early warning signals: Simulate potential financial impacts from events like rising production costs or delayed customer payments, helping identify risks (e.g., lower margins or deteriorating operating cash flow).
• Access prospective credit scoring: Understand the current creditworthiness rating and identify potential risks of deterioration before they materialize.

The flexibility of Forecasting Scenarios makes it a valuable tool for a wide range of users:

• Companies: From SMEs to large enterprises, for internal planning, investment evaluation, or anticipating liquidity needs.
• Accountants and consultants: To streamline the creation of business plans for clients (saving valuable time) and actively support bank negotiations with prospective data-driven insights.
• Banks and financial institutions: To more thoroughly assess loan applications, repayment capacity, and monitor clients’ creditworthiness over time.
• Investment funds: To establish realistic valuations of companies for extraordinary transactions, restructuring plans, and more.

In a world where predicting the future is impossible but preparing for it is essential, Forecasting Scenarios serves as a compass: reliable, dynamic, and strategic. A vital tool for those making decisions today — with an eye on tomorrow.

Want to learn how to apply Forecasting Scenarios to your business?