We’re Ellen and Simone. After 36 years in finance, we’re ready to share what textbooks won’t tell you.

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READ OF THE WEEK

From Frozen Forecast to CFO Toolbox 

Opening Thought "Turning a rolling forecast into a budget isn't theory - it's discipline."

Recap Part I: Budgets aren’t dead, they're redefined.

Forecast = reality, Budget = framework.

The challenge: Many CFOs flip this: they steer with last year’s budget and treat the forecast as a side project.

The result: Instead of driving action, board and management sessions devolve into debates about “which number counts.”

1. Essentials – 4 Must-Haves

Freezing a rolling forecast into a budget only works if the foundation is solid.

(1) Data Quality – Single Source of Truth (SSOT)
No more “Sales says 100, Ops says 120.” If data isn’t aligned, the budget isn’t real. Alignment > precision — otherwise you debate numbers instead of managing performance.

(2) Governance – Clear Freeze Rules
Document. Enforce. No exceptions.

• When? (e.g., quarter-end)

• Who? (CEO + CFO; BU (Business Unit) heads review)

• Re-budget triggers? (>15% miss, M&A, macro shock)

(3) Narrative – Variances as Signals, Not Failures
Every variance must answer: What changed? Why? What are we doing? What’s the revised outlook? Don’t defend numbers explain the story.

(4) Tooling – Fit for Growth
Excel works only up to a point. For scale, complexity, or IPO readiness, tools like Pigment, Runway, Abacum become essential. Rule: If you spend more time reconciling Excel than debating scenarios, it’s time for a tool.

📌 See our Feb 25 Newsletter

A Guide to Reporting & Planning Tools

2. How to Freeze – Step by Step

Step 1: Perfect the Rolling Forecast
You can’t freeze what’s broken. Update monthly with actuals, drivers, and assumptions. Document ownership of every input.

Step 2: Freeze the Forecast
Pick a cut-off (e.g. Sept 30). After that: no tweaks. This creates accountability and avoids endless “what if” debates. Add a short alignment & quality check with BU heads to ensure higher standards without turning it into a full budget process. Think of it as a controlled freeze: concise, but robust.

Step 3: Build the Variance Framework
Agree on categories before the year starts:

• Volume/mix

• Timing differences

• External shocks (FX, tariffs, raw materials, geopolitical events)

• Operational changes (usage-based pricing, AI pilot bucket, new GTM model, org changes)

Step 4: Re-Forecast Cadence

• Monthly light refresh (finance-only, top-down)

• Quarterly full refresh (bottom-up, cross-functional)

• Ad-hoc for shocks (macro, M&A, liquidity crunch)

3. AI & Volatility – Price in the Unknowns

Today’s CFOs can’t assume stability.
The challenge: how do you build volatility into your budget?

Examples that demand buffers:

• Customer freezes: Renewals delayed, seats cut → ARR drops overnight.

• Tariffs: Trump slaps 25% on suppliers → COGS spikes for importers, revenue falls for exporters.

• Usage-based pricing: SaaS costs swing unpredictably.

• AI regulations: Compliance costs jump.

• FX swings: Strong Euro makes your product 10% pricier in the U.S.

• AI disruption: Competitor launches at half your price → margins collapse.

Buffer strategies:

• Innovation bucket: ~5% ringfenced for AI pilots/new bets.

• Headcount flexibility: Budget lean, unlock roles via forecast.

• Efficiency upside: Keep savings in forecast until proven.

• Shock absorber: Reserve 3–5% for FX, tariffs, compliance hits.

💡 Pro Tip – Forecasting with AI

Examples from AI CFO expert Wouter Born:

• Model building: Claude built a 24-month SaaS forecast in 5 minutes.

• Variance analysis: AI spots pipeline conversion drops and surfaces underlying deals.

Recommended: Wouter's CFO Office Newsletter. Covers AI in Finance: what works today, what doesn't.

4. The Culture Shift (In Practice)

In Part 1, we made the case: budget as conversation, not constraint. But what does that look like on Monday morning?

Shift 1: From “Not in budget” → “Prove the ROI”

• Old: “Can we hire that Finance engineer?” — “Not in budget.”
  

• New: “Show me the ROI. How does this change our forecast? What assumptions shift?”

Shift 2: From one number → scenario ranges
Boards don’t want false precision — they want confidence bands:

• P25 = upside
  

• P50 = base case
  

• P75 = conservative “what if”
  This creates real conversations instead of fragile commitments.
  

Shift 3: From spreadsheet jockey → conductor
Your job isn’t to crank out numbers, but to orchestrate dialogue across Finance, HR, Product, Sales, Tech — translating priorities into choices.

Shift 4: From prediction → hypothesis
A budget isn’t truth. It’s a hypothesis, tested each quarter and revised when reality proves you wrong.

The new reality:
In an age of AI disruption and geopolitical shocks, the budget is no longer prediction — it’s a hypothesis, continuously tested and updated.

5. CFO Toolbox – Templates & Guardrails

Weekly Pulse: actuals vs. forecast, pipeline conversion, cash burn, top 3 assumptions under stress

Monthly Refresh: Rolling 12–18 months updated, assumption changes documented, variances >5% flagged

Quarterly Reconciliation: Budget vs. forecast vs. actual bridge, scenario update, decision log

Annual Reset: Rolling forecast → next year's budget. Review lessons learned. Fix process bottlenecks.

Key tools: variance bridge, assumption log, scenario tree, board pack (3 slides), budget lock ceremony.

6. Board Communication – Bridging the Gap

Boards don’t need line items — they need clarity, context, and confidence.

Anchor with the frozen budget
Present it as the official yardstick: external accountability lives here. Stable, but only a snapshot in time.

Layer in the rolling forecast
Show how reality evolves with updated assumptions and outcomes. Use it to steer the conversation, not just numbers.

Reframe variances as signals
“We missed revenue by 8%” → What changed, why, and what’s the action plan. Boards care more about adaptation than explanation.

Pro Tip – Standard 3-slide pack

1. Budget vs. Actual vs. Forecast (the bridge)

2. Key assumption shifts (the why)

3. Decisions + next steps (the what now)

This keeps boards focused on choices, not number fights.

🔎 CFO Watchlist

MIT Study – State of AI in Business 2025

The MIT Media Lab (Massachusetts Institute of Technology – one of the world’s most renowned universities) published a study in July 2025: 300 AI projects reviewed, 150 executive interviews (CFOs, CEOs, CIOs), 350 employee surveys.

Market context: $30–40bn global AI investments in 2024/25.
Focus: Generative AI — language models & AI assistants.

Why most fail
It’s not the tech. Models are mature. Projects fail because of poor integration, weak processes, and lack of skills.

What the 5% do differently

• Buy, don’t build: 67% of successful projects used external vendor tools vs. 33% built in-house. Vendor tools are faster, more reliable, and easier to integrate.
  

• Start small, measure, scale: Tight pilots, clear KPIs, then expand.
  

• Back office potential: While many firms deploy AI in Marketing or Customer Success, the biggest untapped ROI sits in back-office functions, especially Finance → fewer errors, better compliance, faster month-end closes, reduced BPO spend.
  

• AI literacy: Train teams to use, review, and improve AI outputs.
  

• CFO leadership: Tie AI spend directly to operational & financial KPIs.
  

Examples where Finance AI Projects struggle:

• Invoice reconciliation bots collapse when invoice templates change → not resilient unless retrained.
  

• ARR vs. MRR gets misclassified → reports contradict each other, KPIs become unreliable without correction loops.
  

• AI dashboards get built but remain unused → because they aren’t embedded into workflows.
  

💡 Key point: These are not reasons to dismiss AI. Think of AI like a junior employee: it will make mistakes at first, but gets better if you train it, fix errors, and embed it in daily work. Without this, projects stall.

📎 Full MIT Study: The GenAI Divide – State of AI in Business 2025

🌐 Finance Collective DACH

Your go-to CFO Network

(by Simone)

CLOSING REMARKS

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CFO Playbook reflects our personal opinions, not professional advice.