Most financial executives use some form of rolling forecasting to guide their financial planning and budgeting efforts, but do so in a rudimentary fashion, employing mostly manual business performance management processes and spreadsheets that inevitably fail to deliver the precision and manageability they are looking for.
A recent survey of more than 320 senior financial executives in North America and Europe showed that more than 68% of companies have developed and implemented rolling forecasts. However, most of these executives still feel they need to improve the accuracy of their financial forecasts, as well as the time it takes them to produce them.
The study, conducted in September 2006 by CFO Research Services (Boston, MA) and Cartesis also showed that:
- Businesses need better forecasting methods, which solutions like Cartesis Business Performance Management software can provide. These solutions enable expanded use of operational drivers, better what-if scenario creation, and greater collaboration throughout the forecasting process.
- Finance executives, hampered by time and resource constraints, support an incremental approach to changes to their forecasting technology and business processes.
Forecast with a moving horizon
The way a company forecasts its financial and operating activities is a key factor in how efficiently and effectively that company can allocate its resources, make investments, guide shareholders, and achieve and measure results. Finance executives in the survey agreed that better forecasting would lead to tangible benefits, such as reduced risk and increased profitability.
The survey also showed that two-thirds of respondents using rolling forecasts use a basic 12-month time horizon, when 15 months or more is actually preferred. And nearly half of those surveyed use only spreadsheets for financial forecasting, while an additional 21 percent use custom spreadsheet-based applications. Less than a quarter use a dedicated financial planning, budgeting and forecasting application like Cartesis Planning or a fully integrated business performance management software solution like Cartesis 10.Steps to Better Ongoing Budgeting and Forecasting
In order to help companies address the financial forecasting and budgeting challenges mentioned above, Cartesis recommends a pragmatic approach. The approach ensures that early gains will save time and money, which can then be “spent” on further improvements that create long-term value.
Quick wins through automation: Using planning and forecasting applications, such as Cartesis Planning, allows companies to automate processes and reduce reliance on spreadsheets for immediate benefits.
Ease of use as a priority: Rolling forecasts are easy to create, even for multi-year horizons; forecast templates are tailored to each business unit; and benchmarking and what-if analysis is easy, allowing managers to better predict and measure business performance.
Collaboration with flexibility and control: Collaboration, facilitated with workflow management, results in more accurate forecasts aligned with corporate strategy.
Adaptive Financial Planning for Continuous Change – Adaptive planning involves continually improving the planning process to capitalize on past gains.