Why Good Financial Forecasting And Planning Is Inevitable For Agile Organisations
Forecasting and financial planning should be key to any modern business strategy. Why? Because surviving in a volatile commercial world means knowing exactly where your company is headed. Below, we look at why good financial forecasting is inevitable for any forward-thinking organisation, and how you can incorporate effective financial planning into your business.
What Is Financial Forecasting?
Your financial forecast is an estimate of your company's future financial outcomes. They enable your CFO and FP&A manager to anticipate future results based on established, historical data.
What's more, thanks to technological advancements, you can even incorporate external non-financial data into the forecast. You can even adjust the forecast depending on factors such as market conditions, scenarios likely to affect your business, and historical company performance.
Although it's difficult to predict a company's future, a financial driver-based forecast allows you to establish reasonable business goals and objectives.
Why Forecasting And Planning Matters
While some businesses perform reasonably well without much forward planning, these companies are the exception, not the rule.
Make Use Of Your Financial Department
At the heart of every agile, responsive organisation is a well-functioning finance department. Give your team a clear outline of what you need from them, whether it's frequent financial forecasting or specific financial data. Liaise with them closely and make use of the expertise in spending, budgeting, and other cost analysis.
The Office of Finance can help the organization be agile in the following key ways.
Trend Reporting And Decision Making
Financial forecasting helps you identify trends affecting your organisation. These patterns may occur on a monthly, quarterly, or long-term basis. Most importantly, you can then take action based on the positive and negative trends reported.
Provide the Office of Finance with Enterprise Performance Management Software (EPM). This software allows your CFO to turn complex historical data into clear, easily accessible trend reports.
Progress reports help you with your scenario planning. Since scenario planning is all about flexible, long-term strategies, progress reports help you track all-important business and market fluctuations to better inform your plans.
Financial forecasting helps get everyone in your organisation on the same page and moving in the same direction. It gives you a road map, or a plan to work towards. Everyone understands their role within the company and where you're headed.
What's more, financial forecasting lets you identify potential problems or risks early before they become a financial hazard. And enable you to make informed decisions concerning business strategy. Agile, successful companies spot problems quickly and mitigate risk.
Many investors want to see financial forecasts upfront before they'll consider investing in your company. Once you secure investment, investors often want progress reports to see how the company is performing.
You should be able to set out clear, logical business goals based on tangible financial data if you want to impress investors in today's marketplace. Investors are looking for agile, responsive, forward-thinking organisations to align themselves with, and understanding your future finances is a great place to start.
It has never been easier to use your company's historical data to effectively plan for the future. Nowadays, you need to only use one EPM platform for all your financial forecasting and planning needs - a technological efficiency which helps you stay or become agile and competitive.
Agium EPM can help you implement an efficient forecasting process. Get in contact if you consider taking the next step for the Office of Finance.
Download our Professional Forecasting whitepaper