Financial Forecasting Essentials

When applying for FCA Authorisation or Registration, it's essential to include a detailed financial forecast that covers the next three years. This forecast is a crucial component, showcasing the firm's ability to maintain robust operational systems, adequate resources, and proper procedures.

The forecast should be meticulously detailed, encompassing a Profit & Loss Statement, Balance Sheet, and Cash Flow statement. These should all be supported by clear explanations of the assumptions made. It's important to ensure that any narrative is clearly separated from the financial projections.

Include a concise summary of the financial forecast in the Regulatory Business Plan (RBP), and also attach the complete forecast model with the application.

The financial forecast will undergo a thorough review by the regulator’s case officer as part of the application process. This review checks for consistency between the forecast, its underlying assumptions, and other application details, like staffing and outsourcing plans.

Key aspects the review focuses on include:

1. Compliance with capital requirements.

2. Ensuring the firm's liquidity to operate continuously, assessed through the 'going concern' principle.

Applicants must also include stress-tested financial projections in their application.

The guidance provided here is aimed at helping you develop a robust financial forecast for your application. Stress testing should be carried out by your accountant or finance officer, following specific guidelines.

Compliance Consultant can connect you with experts who specialise in creating comprehensive financial forecasts.

# Forecast Period

The financial forecast for the application should cover three fiscal years starting from the expected authorization date. Determine your firm's fiscal year-end or accounting reference date (ARD) first. If your firm is part of a group, it's advisable to align the ARD across the group.

Given that the regulator's review of an application can take about six months after submission, decide which financial years to include in your forecast based on your submission date and fiscal year-end. For instance, an application submitted in March with a December 31st fiscal year-end would include the current financial year, whereas a September submission would start with the next financial year.

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