Summary
How can finance teams overcome challenges in preparing forecasts and plans when confronted with conflicting information about the current state of the economy and what lies ahead in the short to medium term?
The role of the FD
Owing to the mixed expectations of what lies ahead with respect to the economic outlook and as many of us embark on the business planning process for short and medium term, it’s difficult to chart a path based on the divergent assumptions of economists and experts.
The planning and forecasting process is further complicated by the fact that almost everyone has an opinion on what the coming years will bring: things will be better; things will be worse; or things will be much the same.
This ambiguity is compounded by the fact that companies that have “tightened their belts” over the past few years, and introduced restructuring and downsizing initiatives to cope with a slower pace of growth, are now starting to show signs of “austerity fatigue,” and are anxious to embrace a renewed period of growth.
The role of the FD in this climate is to strike a balance between identifying entrepreneurial opportunities and determining a clear path for the company that identifies the financial and business risks proceeding with caution and taking a pragmatic approach to identifying benefits and opportunities in the current situation and potential for growth and expansion.
A wealth of corporate knowledge
While decision-makers should be aware of external factors and analysis, those of us who are not economics analysts, should probably avoid relying on the range of expert opinions as the basis for our business planning and forecasting.
However, there are productive steps that can be taken to ensure that your company is positioned for growth and able to capitalise on any existing opportunities.
Every business has a vast resource of company and cultural history that may not be being exploited to its full potential.
Historical information on seasonal trends, vendor and contract pricing, customer queries and orders placed can all provide a historical context which can provide a foundation upon which to build or revise your next business plan.
But, the next question becomes how to gather all the pertinent data you need and gain valuable insight into all that information.
The case for automation
Many organisations report that they are looking for greater and quicker insights into company performance. And many also report frustration over spending too much time on gathering data and not enough on analysis and forecasting. This results in missed opportunities and a failure to capitalise on changes in the operating landscape, for example, reduced costs for capital equipment, premises and supplier terms etc.
Today’s decision-makers have higher expectations and know that they must be aware of and capable of responding to market fluctuations, competitor activity and other pressures on the business. They need accurate, up-to-date information on the current performance of the company to be able to significantly improve productivity through streamlining processes and maintaining costs.
But, while back office systems often take a backseat to operational systems, proactive FDs are always looking for ways to maximise their use of technologies to reduce duplication of effort and manage change effectively.
Automated processes enable the finance team to conduct detailed analysis and develop enhanced reports that deliver real insight into the business.
With a system that automatically integrates data from disparate sources, time spent on routine reporting, such as month-end or year-end is dramatically reduced, freeing up the finance team to spend more time on more strategic activities.
The automation and distribution of KPIs also mean that decision-makers can routinely monitor performance and refine strategy to ensure that the business is on track to meet its objectives.
The system provides both a historical and current review of results and performance and allows the finance team to forecast with confidence, based on known, actual results.
And with unlimited capacity to conduct “what if” scenarios, the finance team can now produce a range of options to decision-makers to demonstrate the effects of specific changes in internal and external conditions.
This level of detailed analysis helps your organisation recognise subtle trends and patterns, so you can anticipate and shape events and predict potential outcomes. Now you can drive growth, control costs and identify risks that are a threat to costs and identify risks that are a threat to your business and take corrective action.
The more seamlessly the financial system integrates with operational and legacy systems, the better the end result will be, allowing decision-makers to examine the true costs of running their business across multiple channels, and allowing FDs to calibrate regional and country differences and factor them into the forecasting process.