How Can I Get My Business Planning and Forecasting to Move Faster?
5 steps to transforming old-line financial reporting into impactful and intelligent forecasting
COVID-19 threw everyone’s minutely planned business forecasts for a loop. The companies that thrived were those that adapted and pivoted quickly. Rather than panicking, they took a pause, examined the data available to them, and identified revised short- and long-term goals as well as strategies to achieve them. As the business landscape remained highly fluid, these forward-thinking companies continued to refine their objectives and plans as necessary.
This may sound daunting, but with the right forecasting models, it can be easily achievable. Even better, it brings confidence to leaders and stakeholders knowing that the business is actively responding rather than simply reacting.
And this approach is not unique to the upheaval of a global pandemic. Change is constant, whether it be on the local, national or global level. Reflecting on the past year reveals five key steps that all companies can take to respond to change in an intelligent way—and all while moving with more speed, agility and business impact.
1. Continuously Forecast
Year-to-go forecasts have their place. But organizations with a “one-and-done” mindset that use the same data for months may already be behind. Today’s most competitive businesses use resources like KPMG Intelligent Forecasting to create multiple forecasts a year, drawing up new plans when key external forces change enough to impact known business drivers. Some even have scenarios prepared for multiple risks so that they can react immediately and strategically.
Gaining the ability to draw up a forecast any time, on any day, requires two essential components. First, finance will need to automate the forecasting process. And, second, the team will need to incorporate both internal and external data to better predict the volatility of the results and aid decision-making.
2. Embrace Analytics and AI
The amount of data available today is both exciting and paralyzing. There’s no way any human can look at all of the data available to their business. By the time they got even halfway through, everything would be outdated. Plus, existing systems are often too inward-focused, failing to take account for external factors and data points that are indispensable for the most precise forecasts.
As we reviewed on our related CFO Real Insights webcast, using artificial intelligence is not only faster, it frees up managers to focus on strategic thinking and creative execution. It also takes both internal data and the vast amount of external data available into consideration. More data means greater insight into what drives your business, new competitive threats and new markets to tap. Add it up, and AI helps finance see more scenarios as well as how changes would play out for their business in a few months. Then, they can figure out what actions to take today.
3. Start Small
Intelligent forecasting isn’t an all-or-nothing process. In fact, we have found that businesses that pick one specific variable, such as volume of sales, tend to do better than those who try to overhaul their entire forecasting process at once. They create a predictive model that helps them start to incorporate their chosen signals for the short-term—for example, 2 to 3 months down the road.
After they prove out that the data in the model works and should be incorporated into their budgeting and forecasting process, they can then identify which part of the business will benefit the most from this new data application and its related insights. And if the model doesn’t pan out, the finance team can continue to refine it until it does.
Once a business has predictive models around specific variables in place, then it’s time to think bigger, as we outlined in our COVID-19 and the CFO report. The model becomes the basis for continuous forecasting. This type of process offers the ability to see how a shift in some external data point impacts specific internal results—and what that might mean for the organization a few months down the line. With that information, managers can devise strategies for what actions to take today to prepare for that future change.
This shift to continuous, intelligent forecasting gives companies another competitive advantage: the ability to develop various scenarios for the future so that they can react quickly—and with a level head—when the next disruptive event threatens to disrupt their business.
5. Be Realistic
These steps don’t have to be completed overnight. However, building upon the foundation of a predictive forecasting model and formalizing that process will enable quick, efficient scenario planning and “what-if” analyses so that a company can react quickly to any new emerging risks. In a business environment in which, increasingly, the only certainty is uncertainty, companies that incorporate intelligent forecasting capabilities will not simply be more flexible and agile going forward, but they will also be better positioned to thrive amid that uncertainty.
Find out more: Download the full COVID-19 and the CFO: Business Planning and Forecasting report, watch the Road to New Reality: CFO Real Insights webcast and learn how KPMG Intelligent Forecasting can help improve profitability.