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.