Tips to Forecast Like a Boss

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forecasting like a boss

Let’s admit it, forecasting can be intimidating.

Not only that, but after a grueling budget season, especially if you don’t have the proper tools and resources at your fingertips, who wants to sit down and essentially re-budget or forecast after the first month or so of your fiscal year?

Reality check… If you are not currently using a forecast on a regular basis, you could be missing out on hot clues into lost profitability or a more disastrous situation looming in the shadows.

Benefits of Forecasting

Companies who routinely create budget forecasts see these three primary benefits:

  1. Forecasting forces you to face your financials – even when you don’t want to. Let’s face it, the future is unpredictable and can change in the blink of an eye. Avoiding the future is obviously not optimal, so reviewing budgeted data in detail, and hopefully at the line item level, shortly after the beginning of your fiscal year will prove to be a worthwhile exercise.
  2. You start to see patterns in your variances. With routine forecasting, you’ll gain a manager’s insight into variances and provide a timelier process of reviewing discrepancies. By reviewing your budgets against actuals, you will more regularly catch variances and be able to revise them moving forward.
  3. You can plan ahead for future forecasts. Remember to make comments along the way as you forecast. Tell yourself why you are making that monthly change to your budget and if it will be an impact to your budget next year. These comments will provide useful information when it comes time to budget next year and will make the process more efficient.

Frequent budget forecasting questions

How often should I forecast?

Some folks will create multiple versions of a forecast throughout the year. I’ve seen forecasts done on a weekly basis, monthly basis, and quarterly basis, as well as various forecast formulas. You may want to change your financial forecast intervals when cash flow is tight or you’re considering a major investment. Others might forecast more frequently when there are significant changes to the economy.

Forecasting done too frequently might prove to be irrelevant as data is limited and has not had time to create necessary trends. On the other hand, forecasting done too infrequently might be lacking vital and timely information that is key to your business. The perfect forecast lies somewhere in the middle.

What method should I use to create my forecast?

There are a number of ways to forecast, and there is no right or wrong method.

Some forecasts are done using a blend of actuals and budget values while some are done using a blend of actuals and annualized values for the remaining months.

Some forecasts are done using a blend of actuals and budgeted values with or without additional lines for adjustments in dollars or percentages.

The question to ask is, what is the best formula and frequency for your business and your managers?

For some ideas and visuals on forecasting methods, check out 5 methods we’ve outlined here.

What should I be forecasting?

If you are not currently forecasting, or your forecasts prove to be not very useful, I would suggest gathering the key members of your business together to discuss the process. Ask questions like, “what data or information is relevant to your role?” or “what do you look for in your financials to make decisions?”

Outline the questions in advance and then discuss them as a team before you begin your forecasting exercise. Map it out and then review it again at another meeting to ensure everyone is on the same page. Discussing these questions in advance as a team will ensure a successful forecast moving into the unpredictable future.

Using Dynamics Budgets for Forecasting

Companies choose Dynamics Budgets for forecasting because it’s easy to setup, easy to learn, and easy to use. Our Forecast Builder engine uses live links to ERP systems like Dynamics GP, so users can drill down directly into the details. Contact us today to schedule an in-depth demonstration using your own data! We can install and show you forecasts in as little as 2 hours.

For more resources on forecasting, check out the Blog from the International Institute of Forecasters.

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