Why Accountants Love a Three Way

By Mark Liner

CFO Consultant

Feeling the euphoria after a successfully completing a three-way.

For those in the know, including accountants, lenders and shrewd business owners, there's something deeply thrilling about a three-way forecast. 

Few things get an accountant’s pulse racing like a well-structured, fully integrated three-way financial forecast.

It’s intimate, it’s strategic, and when all three components align? Let’s just say, accountants know how to finish strong—with spreadsheets that are clean, projections that are tight, and stakeholders who can’t help but lean in a little closer.

So, before your mind wanders too far, let’s bring it back to the boardroom—where the real seduction happens. Welcome to the sultry world of three-way forecasting, where cash flows dance with profit and loss, balance sheets flex their muscles, and accountants finally get the recognition they deserve.

What Is a Three-Way Forecast?

A three-way forecast is the ultimate trifecta of business planning. It combines three core financial statements into one harmonized projection:

1. Profit and Loss Statement (P&L)  – This shows how much money the company expects to make (and spend) over a given period.

2. Balance Sheet – A snapshot of the company’s financial position at a specific point in time, detailing assets, liabilities, and equity.

3. Cash Flow Statement – The heartbeat of any business, showing the actual movement of cash in and out of the company.

When these three statements are linked and updated dynamically, they form a living, breathing model of a company’s future financial health. Think of it as financial foreplay—each component teases the next, revealing insights that none could offer alone.

Profit & Loss: The Passionate Projection

Let’s start with the P&L—the first act in our forecasting performance. This is where revenue fantasies meet expense realities. Every line item tells a story: sales targets, cost of goods sold, operating expenses, and the grand finale—net profit.

For accountants, building a P&L forecast is like setting the stage for a night of possibilities. They tweak assumptions, adjust margins, and watch how small changes ripple through the bottom line. It’s a delicate balance between optimism and realism, and when it all lines up? Pure accounting ecstasy.

Balance Sheet: The Quiet Power Player

Now, while the P&L may steal the spotlight, the balance sheet is the quiet powerhouse lurking backstage—always watching, always balancing. Assets must equal liabilities plus equity, and in a three-way forecast, every number here has to sync perfectly with the other two statements.

This is where accountants show off their restraint. They track retained earnings from the P&L, monitor debt levels, and ensure liquidity stays intact. It’s not flashy, but damn is it satisfying when everything balances—like hitting the jackpot after playing it smart.

Cash Flow: The Real Climax

But let’s be honest—no matter how sexy your P&L or how balanced your balance sheet, if the cash flow forecast dries up, the party’s over.

Cash flow is the raw, unfiltered truth. It doesn’t care how profitable you look on paper—it wants to see actual money moving in and out. And when you integrate it into the three-way forecast, you suddenly have a crystal ball into the company’s ability to survive, grow, and thrive.

Accountants love forecasting cash flow because it strips away the illusions. It’s the moment of truth, the final check, the deep breath before the big reveal. Will there be enough to pay the bills? Can we afford that new hire? Should we take on more debt?

Spoiler alert: With a solid three-way forecast? You’ll already know the answer.

Why Accountants Are Head Over Heels for Three-Way Forecasting

Three-way forecasting isn’t just about predicting the future—it’s about controlling it. It allows accountants to stress-test assumptions, model different scenarios, and guide businesses toward smarter decisions. It’s the kind of power that makes them feel like financial fortune tellers, minus the crystal ball and questionable accent.

Plus, let’s be real: There’s something deeply gratifying about linking three complex financial statements and watching them move together like a synchronized dance troupe. One change here ripples through the others, creating a seamless flow that only a true financial connoisseur can appreciate.

Closing Thoughts (And Yes, We’re Going There)

So, the next time you hear an accountant whisper the words “three-way forecast,” don’t assume they’re talking about anything risqué. Though honestly, with the level of detail, precision, and anticipation involved—you’d be forgiven for thinking otherwise.

Because when numbers align just right, when forecasts come together in perfect harmony, and when every assumption checks out? That’s the kind of satisfaction that leaves even the most reserved “bean counter” smiling behind their spreadsheet.

Until next time—keep those models tight, your projections hotter than a year-end audit, and remember: the best forecasts are the ones that leave you wanting just one more scenario.

Ready to experience the power of a Three-Way Forecast for your business? Contact us today to learn how we can help you achieve financial clarity and control!