Involving more relevant people in the process. This requires interacting with each department and collecting those items that have a significant impact on overall performance. For sales this could include collecting information on sales situations, noting where they are in the sales cycle and the percentage chance of success. For customer service this may include customer response times and the number of open issues. In each case the quantity and level of data is different.
Challenging assumptions on what drives performance. Forecasts are assumptions. They assume a given level of resource will be applied to support a certain level of organisational activity, to produce an anticipated level of outcome. As such there is an implied connection between resources, workload and results. To assess forecast accuracy, these implied connections can be modelled and challenged.
Collecting evidence to back up predicted numbers. Forecasts are an assumption about what may happen in the future. Because of this, it should be possible to provide a ‘story’ behind any number being forecast so that management can make a judgement as to whether the figures being entered are likely to be achieved.
Analysing trends to see if submitted forecasts are logical. A sure sign of an unrealistic forecast is when there is a step-change in performance from one period to the next, or where trends differ from one year to another. Now there may be a good reason for this, but it needs to be highlighted and explained.
- Administrators to define what is to be forecast (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 just enter IT related costs, while Human Resources may submit salary information for the complete organisation.
- Financial Driver’s 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 their 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.
- 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 look at the detail behind the numbers as well as plot forecasts as a continuation of the current year and superimpose them on the current budget. Should any forecast seem out of line or deviate significantly from plan, then these can be investigated and bought to the attention of senior management.