Set Up Your Assumptions with AI
Every forecast is built on assumptions: how fast sales grow, what each sale costs, how quickly customers pay. A model is only as good as these inputs. The formulas just carry them through.
This is the step where AI is most tempting and most risky. It will happily invent numbers that sound reasonable. In this lesson you will use AI the right way: to explain, question, and pressure-test assumptions you already have, not to make them up.
What You'll Learn
- What each Brightcup assumption means and where it comes from
- How to lay out an inputs section so the model is easy to change
- How to use AI to challenge assumptions instead of inventing them
- What data you should never paste into a public AI tool
The Brightcup assumptions
Rows 3 to 14 of your template hold every input the model needs. Nothing in columns C to E below row 14 should be typed by hand. Column B holds the Year 0 actuals, which are given.
| Row | Assumption | Years 1 to 3 | Where it came from |
|---|---|---|---|
| 3 | Revenue | 1,100 / 1,200 / 1,300 | Management sales forecast |
| 4 | COGS % of revenue | 60% | Year 0: 600 / 1,000 |
| 5 | Operating expenses % of revenue | 25% | Year 0: 250 / 1,000 |
| 6 | Depreciation | 50 per year | Equipment schedule |
| 7 | Capex | 60 per year | Planned roaster upgrade |
| 8 | Interest rate on opening debt | 6% | Loan agreement |
| 9 | Debt repayment | 50 per year | Loan agreement |
| 10 | Tax rate | 20% | Simplified flat rate |
| 11 | Dividends | 20 per year | Owners' plan |
| 12 | Receivables % of revenue | 10% | Year 0: 100 / 1,000 |
| 13 | Inventory % of COGS | 15% | Year 0: 90 / 600 |
| 14 | Payables % of COGS | 10% | Year 0: 60 / 600 |
Notice the pattern. Most assumptions are simply Year 0 ratios carried forward. That is the most common starting point in real models too. You change them only when you have a reason.
Two layout rules that save hours
Rule 1: inputs in one place. Every number you might want to change lives in rows 3 to 14. The statements below only contain formulas. When you want to test "what if costs rise to 62%?", you change one cell, not twenty.
Rule 2: color your inputs. Format rows 3 to 14 with blue text. Leave formulas in black. This is a long-standing finance habit. Anyone opening your model, including you in three months, can see at a glance what is typed and what is calculated.
Ask AI to explain, not invent
A good first prompt gives AI your actual inputs and asks what they imply.
Converting percentages into days is a useful check. Receivables at 10% of revenue is about 36 days of sales. If you know cafes usually pay in 30 days, 36 is believable. If AI tells you 10% means 100 days, its math is off. Days are easy to sanity-check against real life.
Ask AI to challenge your assumptions
The more valuable prompt asks AI to argue with you.
Good answers here sound like: "Why does margin stay flat if coffee bean prices are volatile?" or "Why do operating costs grow at exactly the same rate as sales?" These are the questions a manager, investor, or exam marker will ask. Write down your answers. That is the start of your model's story.
Why "do not suggest new numbers" matters
AI tools can produce industry benchmarks that look precise but have no real source. A sentence like "coffee roasters typically have 38% gross margins" may be made up. If you need a benchmark, ask AI where to find one (public company reports, industry associations, government statistics), then look it up yourself.
Write the assumptions as a short memo
Once you are happy, have AI turn your inputs into a short assumptions note. This becomes the first page of your model and is great practice for any finance class or interview.
Keep private data out of public AI tools
Brightcup is made up, so paste away. With a real employer's or client's numbers, check the rules first. Many companies do not allow internal financials in public AI tools. A simple workaround: describe the structure and use rounded or scaled numbers, then apply the formulas to the real sheet yourself.
Key Takeaways
- Put every input in one block (rows 3 to 14) and color it blue. Statements contain only formulas.
- Most assumptions start as last year's ratios carried forward. Change them only with a reason.
- Use AI to explain assumptions and convert them into days, which are easy to sanity-check.
- Ask AI to act as a skeptic and list questions. Tell it not to suggest new numbers.
- Never trust an AI benchmark without a real source, and keep confidential numbers out of public tools.