By Neil Kinson, VP EMEA at Redwood Software
The impact of forecasting has a profound impact on any business. Get it right and you'll forge ahead of any would-be competitors. Get it wrong and it will cost you the confidence of shareholders, respect from customers and critically, business performance.
Recently, the headlines have been littered with stories of the Tesco accounting scandal. According to The Guardian, when the news broke that the company had overstated its forecasts for profits by £250million, share prices dramatically fell 11.5%—an 11-year low—erasing £2bn in value in one clean break. In order to restore investor confidence, four senior executives "stepped aside." Now Tesco is focused on rebuilding its reputation. However, after such a serious scandal, that can be a difficult and expensive task.
KPMG/Economist Intelligence Unit found that forecasting errors have cost organisations 6% of share price, on average, over three years. It only takes one misread report or miscalculation to lose a significant amount of market capital. The Report’s findings also revealed that only one in five organisations currently produce a forecast that is reliable. With the cost implications of inaccuracy so high, what can be done to sure up the future of forecasting?
Don’t risk it
The process of forecasting is undeniably complex, with many different steps, silos and systems to bring together with impeccable accuracy.
Generally, businesses rely on a traditional, manual approach to this challenge—one where spreadsheets and sheer human effort produce reliable results. However, with the addition of every manual step, the risk of human error compounds.
There is also a high risk of deviations between forecast and actuals, and these deviations need to be minimised as much as possible. It’s critical to ensure forecasts are accurate to promote insightful planning, instill business confidence and make the right decisions.
With many disconnected parts bridged by even the best minds in finance, the chances something will go wrong are high. For the most accurate accruals and forecasting figures, businesses must eliminate this substantial risk.
Deloitte recently noted: “When it comes to forecasting and planning, it’s useful to think like an investor or analyst. A risk-adjusted approach provides deep insights into the risks and assumptions behind a company’s forward-looking numbers. This typically gives those involved — both internally and externally — much greater confidence that the forecasts and plans are realistic and achievable.”
Turn to technology
The most efficient and effective way to guarantee up-to-date risk-adjusted forecasting and actuals is to remove manual effort and automate as many of the processes that feed into and out of it as possible. With process automation you can cleanly and accurately repeat business and IT processes again and again without having to worry about human error—or even fatigue.
Without the reliance of so much sheer human effort, organisations can achieve complete coordination and alignment across the most inclusive and complex process steps. Process automation can take hundreds of thousands of these steps and bring them together into one single, unified task. It can even check itself that the final results are within appropriate reason.
Automation provides businesses with the ability to react to changing environments with great agility using far less human effort. It's faster, simpler and more controlled than the manual alternative and provides the confidence and accuracy needed for the right forecasts. With the latest and most up-to-date business information on hand, business leaders get the decision support they need while investors get the peace of mind they deserve.