Why Companies Need a Dynamic Way to Forecast — and Reforecast
It is not hard to predict, or at least anticipate, the future when everything is business as usual. However, if your company experiences a delayed product launch, unplanned acquisition, or reduction in force, then your budget and forecast can quickly become obsolete.
In today’s rapidly changing market, finance and FP&A departments are under pressure to develop accurate forecasts and re-forecasts in response to evolving conditions. Such dynamic financial forecasting empowers organizations to quickly adjust plans based on real-time data and new insights.
Organizations that stick with low-tech tools like spreadsheets that make it difficult and time-consuming to reforecast can’t pivot effectively. Spreadsheets simply were not built to gather, consolidate, and model on a continuous basis. The moment data is downloaded into Excel, it becomes siloed and static. And the last thing finance teams want to hear from executives and the board is that the target figure for a KPI is no longer valuable or realistic.
Organizations that embrace continuous financial forecasting are positioned to capitalize on the latest opportunities and succeed. That requires the right technology and processes.
3 Best Practices for Dynamic Forecasting and Reforecasting
Use a centralized financial planning solution. Seamless synchronization between your ERP and planning and budgeting systems empowers finance teams to easily seed actuals and information in daily planning and forecasts, eliminating the need for departments to coordinate and consolidate offline.
A centralized solution also gives more stakeholders throughout the organization the opportunity to see how data fits together. This increases accuracy and confidence in forecasts and models. And ultimately, faster delivery of financial results allows an organization to respond promptly to changing business opportunities.
Perform driver-based modeling. Forecasting revenue and expenses by manually consolidating spreadsheets makes an already complex task even more difficult. Updating a spreadsheet with new actuals or assumptions can feel like creating a new model from scratch each time — it’s a lot of work. And because revenue and expense forecasting depend on close collaboration across the business, it can be difficult to get the data you need when you need it.
This approach is also prone to errors and version control issues and can lead to a damaging disconnect between your organization’s strategic plan and its operating plan. Driver-based modeling focuses on the link between business activities and financial forecasts. By evaluating the business drivers that actually affect financial performance, driver-based modeling improves transparency among departments. This allows finance teams to work closely with business leaders to identify all relevant drivers that impact business performance.
Support rolling forecasts. One of the biggest pitfalls of the traditional budgeting and forecasting process is that it is completed only once per year. In most cases, annual forecast targets are obsolete after two to three months, and business plans built around projections based on a single point in time are often proven inaccurate. Rolling forecasts solve that problem by creating evolving plans for fast-growing organizations. These companies can quickly adjust their plans based on new information as it flows in to keep up with their growth and shifting priorities.
Attempting to create rolling forecasts in spreadsheets, however, is inefficient and time-consuming. Rolling forecasts allow businesses to continuously plan, save time in the planning process, and provide finance teams with the information and insights they need to help executives make smart decisions that drive the business forward.
Dynamic Forecasting in Action with NetSuite
With less time spent on manual consolidation, troubleshooting, and data loading, finance and FP&A teams can reallocate time from data entry and formula maintenance to strategic financial analysis activities that have a greater impact on the company’s financial health.
This is the type of work that leverages their unique expertise and sets up your business for future success.
NetSuite Planning and Budgeting enables finance teams to automatically collect all the financial and operational data and KPIs in one shared environment — and when all stakeholders can access the same data set, financial forecasting and reforecasting become faster and more accurate. NetSuite customers realize improved forecast accuracy with the predictive planning engine, fueled by actuals coming from NetSuite ERP. Finance teams can run multiple what-if scenarios quickly for management or board meetings.
NetSuite Planning and Budgeting automates labor-intensive planning and budgeting processes so finance teams can quickly and easily produce budgets and forecasts, model what-if scenarios, and generate management and board reports, all within one collaborative, scalable solution.
-Rami Ali, Sr. Product Marketing Manager
