One of the great benefits of technology today is it frees us from being locked into data. This especially comes in handy when looking at financial information. After all, when the budgeting and forecasting process can take weeks and even months to prepare, the numbers could already be out of date by the time the final product is presented.
In the past, organizations didn’t have much in the way of choice. The time and effort that went into forecasting was too much of a drag to constantly be updated during the fiscal year. However, times have changed. Now, organizations can not only forecast much more quickly, allowing for more agile decision making, but they can also reforecast as needed, based on changing conditions.
However, even with the option to embrace reforecasting, many organizations still are not putting it into practice. There are several reasons for this. Some feel that a reforecast means the original was a failure, while others simply can’t reforecast effectively with the tools they have—like Excel.
If you’re ready to start reforecasting, there are a few best practices you should know that will help make the process as effective as possible.
Build It In
While every business would love to have an accurate yearly forecast every single time, reality makes that unlikely. Understanding that internal drivers and external forces can change, not only during a year but even in a quarter, is key to managing the financial side of a business.
So rather than hope you won’t have to reforecast, make it a built-in part of your planning cycle. Knowing that you’re prepared and have reforecasting scheduled for a set time frame can make the process run much more smoothly.
Understand the Drivers That Matter
While there are innumerable factors that can drive a forecast off the rails, not all of these drivers are the key performance indicators that matter for your organization. Although automation makes the process of building forecasts and reforecasting easier, ‘just because you can’ isn’t exactly a sound practice either.
Therefore, it is important to understand those factors that can dramatically impact your business and could cause an unscheduled reforecasting to occur. Know your own KPIs and business drivers first, then you’ll be able to make decisions based on specific changes, whatever the source.
Streamline the System
One of the main struggles that organizations cite when it comes to the traditional budgeting and forecasting process is inefficiency. Coordination between departments, pulling data and calculating potential fluctuations can all cause a drag on the system.
This is not something you want to repeat when it comes to reforecasting. Instead, work on streamlining the process. Having a set date for reforecasting or a specific set of triggers helps. In addition, avoid getting bogged down in the details and work on creating a set model that can be used repeatedly.
These best practices should be able to get you started implementing reforecasting in your business. For many organizations trying to become more forward-thinking and agile decision makers, reforecasting is a vital tool.