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Business Forecasting: Involve more, relevant people

In this series of blogs I’m looking at how to improve the accuracy of business forecasts and the role of forecasting systems such as Financial Driver. In my last blog I looked at whether a forecast can ever be accurate and a number of keys that can ensure that forecasts are at least backed up by reason. In this blog I’m going to look at the first key of involving more people in the forecasting process.
Forecasting, unlike setting targets, is a bottom-up process. It requires those who are closest to business activities to give the most realistic view on what is going to happen. This is important as knowing the difference between ‘reality’ and ‘desires’ as expressed in a budget, helps pave the way to creating actions that will reduce the gap between the two. To do this requires a system that is multi-user, and that ‘knows’ which users are responsible for what departments along with the associated measures. Most planning systems such as Financial Driver have this capability ‘built-in’ and would require the following actions:
  • First, administrators define what they would like to capture (e.g. sales, expenses and departmental costs), from which departments, and for which period of time (e.g. the next 3 months plus an annual outcome). The level of detail can vary according to department, for example sales departments may be required to enter sales and expenses; the IT department would need to enter just IT related costs, while Human Resources may enter salary information for the complete organisation.
  • Second, the workflow capability then ‘hands out’ these requests to each user and automatically provides a tailored data entry screen to capture what was requested. The security system automatically filters out data users are not allowed to see and can provide comparatives, such as the budget, to help with submissions, which can be viewed and not changed.
  • Once a user has entered the data, they can submit it for approval, and at the same time they will be locked out from making further changes until the next forecast is required.
  • Next, those responsible for authorising submissions will be sent an email to let them know that a forecast is ready for review. Here they can then either accept or reject what has been entered.
  • Finally, because all data is held centrally, administrators and reviewers will always know the status of any submission, and they can perform a consolidation at any time to see the latest position.
This level of automation means more people can get involved, but without much effort being required from those overseeing the forecast process.   Check out the online demonstration page to see how this is done in Financial Driver.   Of course having collected the data the work now starts in understanding what is being forecast and what needs to be done where differences arise. That will be the subject of my next blog.