When creating a solid business plan, one of the most crucial components is your financial forecast.

A well-prepared financial forecast not only helps you plan for the future but also increases your chances of securing funding from investors. Not only that, a solid financial plan can increase your chances of success by 30%.

But, creating budgets and forecasts without historical data is often the most difficult part of business planning for most entrepreneurs. Knowing what to include in your forecast, figuring out the numbers, and then making sure your forecasts are error-free can be time-consuming and confusing.

The introduction of powerful AI tools might change that. Despite being “large language models”, tools like ChatGPT are capable of doing math and working with numbers, while also providing useful suggestions to help with financial forecasting. 

These new AI tools do have some limitations, though. They aren’t a “just push the button” solution to the pain of budgeting and forecasting.

In this blog post, we will explore how ChatGPT can assist with creating the financial forecast section of a business plan. We’ll also dive into the limitations and what you can do to work around them. Once you have your financial plan in place, be sure to check out our article on advanced ways to use ChatGPT for forecasting.

Benefits of using ChatGPT for financial forecasting

Working with ChatGPT as you build your financial forecast is like having a business-minded co-founder or knowledgeable professor in your corner. The AI can help you think about: 

• •How to structure your forecast
• •What to include
• •How to approach coming up with the numbers

If your business is already up and running, you can also use ChatGPT to analyze historical data. This can help you identify seasonal trends and provide other insights, such as the products that are driving your profitability, as you’re working on a forecast. Most importantly, ChatGPT can get you past that “blank page.” It can quickly help you come up with initial numbers and a structured approach to your forecast.

Limitations of ChatGPT in Financial Forecasting:

While ChatGPT offers many benefits, you should also be aware of its limitations.

First, and most importantly, ChatGPT only knows what you tell it about your business. And, because every business is unique, there’s no way for it to accurately predict the financial future of your business. It is crucial to supplement ChatGPT’s insights with human expertise and industry knowledge for a well-rounded financial forecast.

Second, ChatGPT’s knowledge is currently limited. It may provide some insights about your industry or your target market, but it’s not always clear where that data comes from, how old the data is, and if it’s even accurate. When ChatGPT tells you that your business has 200,000 potential customers, you really need to fact-check that number.

Finally, ChatGPT can’t easily create a fully linked financial model. ChatGPT can certainly do math and even help you create a simple sales forecast or expense budget. But it doesn’t function like a spreadsheet or business planning tool—where you can change numbers in your sales forecast and immediately see the impact on your cash flow and profitability. 

You could spend time carefully crafting prompts to get somewhat close to the functionality of a spreadsheet, but there are better, more efficient tools for this kind of work.

With those disclaimers out of the way, let’s move on to learning how to get the most out of ChatGPT for financial forecasting. Looking for guidance on how to use ChatGPT to write the rest of your business plan? Check out this recent write-up.

How to use ChatGPT to help build your sales forecast

1. Start with your current sales data

If you have historical sales data for your business, ChatGPT can take that data and create a forecast for you. It’s important for you to:

1. 1.Specify the time period for the forecast (e.g., 12 months, 3 years).
2. 2.Provide historical sales data, including any patterns or trends.
3. 3.Mention any expected growth rates, market changes, or other relevant factors.

2. No data? Use ChatGPT to identify possible revenue streams

However, if you’re creating a forecast for a new business, the process is a bit different. You’ll first want to get advice on how to structure your sales forecast and figure out what revenue streams you want to forecast. 

After all, a good sales forecast isn’t just a single number. Instead, you’ll want to break it down into the main products that you’re selling or the main channels that you sell through. For the best results, you’ll need to include as much information as you know about your business:

• •Your business description 
• •Target market(s)
• •Channels you intend to sell through

This will help you figure out the overall structure of your sales forecast and what’s going to be best for your business. If you’re not sure about your target market or sales channels, you can try a simpler prompt:

3. Get to your actual numbers

Once you have decided on the structure of your sales forecast, you can use ChatGPT to help with the actual numbers. Now, if you just ask the AI to create a forecast based on a list of revenue streams, you’ll get something like this:

This can certainly be helpful but, as ChatGPT says, you’ll need to figure out how to make the numbers your own, based on your own research. 

To get numbers that make sense for your business, you’ll need to figure out how many customers you might have in a given month and do some of your own market research. ChatGPT can help you think through this, but it can’t provide the numbers for you.  

To get a useful forecast, you’ll need to know things such as the size of your target market and have a reasonable estimate of the percentage of that target market you think you can sell to. You can provide those assumptions to ChatGPT and then let the AI do the basic math for you.

At a minimum, for ChatGPT to help you develop a good forecast, you need a way to: 

• •Figure out how many potential customers you might reach in a month.
• •Determine how many of them you think will become paying customers.  

For sales forecasting, the more you know about your business, the more that AI can help you. And, if you don’t know a lot about your business yet, having a conversation with ChatGPT helps you think through your business and how to structure your sales forecast. It’s not a real replacement for actual market research, but AI can certainly help you brainstorm and get the ideas flowing.

Related Reading: 9 Best AI-Powered Business Plan Generators Ranked

How to use ChatGPT to help build your expense budget:

1. Use ChatGPT to identify and list common expenses

You can follow a similar process to build your expense budget for your business plan. Start asking for help by getting ChatGPT to list common expenses for a business like yours. A simple prompt will get you pretty far:

Be careful here, though. ChatGPT can often misunderstand the difference between expenses and assets. 

For example, if your coffee shop needs an espresso machine that costs $10,000, that should be classified as an asset in your business plan and not an expense. If you’re applying for a bank loan, that’s an important distinction to get right. One way to solve this problem is to instruct ChatGPT to not include asset purchases in your expenses and provide a definition of an asset vs expenses.

2. Get to your actual numbers

Just like with the sales forecast, there’s only so much ChatGPT can do for you. You need to have a sense of your business, your market, and your specific expenses. 

For example, only you can know your rent and what your employee salaries are. ChatGPT can give you some guidance, but you’ll need to validate the numbers with real-world research.

If you want to have ChatGPT try to estimate expenses for your business a prompt like this will help you get started:

How to build your personnel forecast with AI help

Your personnel forecast is your prediction of whom you are going to hire, when you’re going to hire them, and what their salaries will be.

ChatGPT can provide you with ideas of the types of people you might hire in your business. However, it can’t really determine exactly which positions to hire first and when you should hire them. With a simple prompt, ChatGPT will give you a list of the key roles you should consider in your company and even provide some broad salary ranges.

ChatGPT is very helpful with its response, identifying that this type of company is going to need a project manager, designers, software developers, etc. But, it does start with a disclaimer about its limitations:

This is really the crux of the limitations of using ChatGPT for your financial forecast. It can help you with the overall structure and come up with ideas, but it doesn’t know what’s unique about your business and how you’re building it.

Tying it all together: Profit and Loss, Cash Flow, and Balance Sheet

The magic of a good financial forecast is that—when it’s all tied together properly—changes you make in one part of the forecast automatically show how they impact other parts of the forecast. 

For example, if you change your sales forecast, you can immediately see how that will impact your profitability and cash flow. If your business has inventory, you can see how changes in inventory levels impact your balance sheet.

This is where ChatGPT is less helpful. You can teach it about the financial model that you’d like to create, but creating a detailed and linked financial forecast is beyond its current scope. Other tools are simply better for the job, such as Excel, Google Sheets, and dedicated business planning tools like LivePlan.

Combining ChatGPT with other financial tools

To build a comprehensive financial forecast, consider integrating ChatGPT with other financial tools and software. This will allow you to leverage the strengths of multiple platforms for a more in-depth and accurate forecast.

For ChatGPT, leverage it for what it’s best at—generating ideas and providing summary information for each area of your forecast. You can also use AI to analyze unstructured data, such as market trends, news articles, and industry reports. This information can help you refine your forecast as you figure out what external factors may impact your business.

Then combine the ideas, inspiration, and knowledge from ChatGPT with a solid financial forecasting tool. This will ensure that your forecasts are detailed and well-thought-out forecasts that will help your business grow.

Broadly speaking a financial forecasting tool or template does the following better:

• •Ensures your financial statements and forecasts are structured correctly and that the math is correct.
• •Automatically connects your forecasts together so changes are reflected everywhere.
• •Helps you avoid making mistakes when updating or changing elements of your forecast.
• •Doesn’t rely on an ongoing “conversation” with an AI chatbot that you need to be sure is saving all your information.
• •Makes it easy to track your budget compared to your actual results so that you stay on track.

With a solid forecast in hand, you’ll be able to use it for ongoing planning to grow your business. Validate your initial forecast by comparing it to your actual results and then adjust your forecast and strategy as needed. That’s ongoing planning—growth planning—and the foundation of a strong and healthy business.