When preparing your financial projections, profit, and loss accounts, should you hold a positive, realistic or pessimist perspective?

Generally, your projection should be realistic, but in some cases it can be conservative (better than "pessimistic" term) as in the case of global economic recession, and in other cases it can be optimistic as in case of continuous growth.
I suggest to place several scenarios for your projection, such as conservative and optimistic, or realistic and optimistic.
Also you can make re-forecasting for your projection during the year if material variances appeared during the projection period.
In addition, it is important to avoid a "budgetary slack" situation during your projection process, which means underestimating the amount of income or overestimating the expenses.

I would suggest to prepare three scenarios, 

Optimistic for investors. 

Realistic for the management 

Pessimistic for the entrepreneur. 

 

Projections are made to serve as guides to future actions and to help management decisions with respect investments/disinvestments or expenditure/revenue.
Hence, it has to be above all, transparent and 'honest' to its purpose.
It is only when one looks at them, does one have to decide whether to look at them optimistically or conservatively.

There are many factors affect the financial projections of your project for example ; the marketing strategy, the level of commitment , the forecast and so on.
From my point view, be realistic and keep an open eye in the input and output and the circumstances that might affect them.
As the gentleman said, place several scenarios and be ready for plan B and C as a backup.
Don't forget the positive optimistic side that will help a lot.
good luck and all of the best

As a trained Accountant who has always been drilled to understand and practice one of the accounting fundamentals, conservative.
By practice, it is natural to be realistic, nearing to pessimist when preparing financial projections.
In fact this approach is expected.
However when the projection is being prepared to be presented to potential investors or lenders, it is expected that the projection to be positive, so that the project be seen as viable.
In evaluating a project, a more pessimistic approach is adopted.

positive manner, base your statements on facts ,pessimistic and realistic

Dear Yazan,

there are various process types commonly used to prepare your financial plans. The one you might refer to at the moment is the so-called "scenario technique" where you make your forecasts based on three alternative scenarios:

* best case

* worst case

* most realistic case (from the present point of view)

The one which is normally used is the realistic one, the other two are only to have an idea about possible deviations and are also very useful for your internal risk management department (wort case scenario).

Having a false forecast is always bad (even when things turn out to be better than forecasted - as paradox as it might sound at first). It is even worse when you realise a deviation and cannot respond to it ( a controllers nightmare).

My answer is: Go with the forecast that is the most realistic at the moment and be aware that things can change. In order to be prepared stake your boundaries by checking the best and the worst case as well and think about your strategies to respond to deviations.

Best regards,

Wolf