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DRIVER BASED BUDGETING & FORECASTING

Transition to a continuous forecasting model  

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In a business environment characterized by rapid and frequent change, forecasting is the aspect of traditional business planning and analysis (FP&A) about which many business planning professionals are least confident. In the ongoing quest to improve the underlying forecasting process, we believe organizations should move beyond the traditional budget cycle and strive for a more agile and flexible approach. This entails examining specific business drivers and developing a deeper understanding of the factors most likely to move the forecast in the right direction so the team can react quickly and with conviction.  

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The key is to ensure the planning process is more holistic, with forecasts and budgets prepared in an integrated manner and with relevant functional areas aligned.

Traditionally, organizations develop a detailed, bottom-up annual budget matched to top-down growth targets established by senior management. Looking at drivers and impactful internal and external data elements provides foundational models that the business can use to confidently build a future projection. 

It’s not just about using prior years’ historical results to predict future financials. Organizations should also assess the prevailing economic environment as well as external data elements and focus on building those components into the forecast.

Unprecedented marketplace disruption requires companies to reinvent existing finance processes, organization structures, and strategic imperatives. Similarly, forecasting needs to be more agile  and predictive.

 

An effective rolling forecast process is about identifying the right drivers that have an impact on the organization’s financials while avoiding an unnecessary lengthening of the overall budget cycle. It’s using the right  technology, such as artificial intelligence and machine learning, to automate the process, where possible, to free up capacity within the organization to unlock value.

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Stop spending half the year on budgeting and start implementing a more insightful and accurate rolling forecast by:

Aligning with commercial and operations teams to deliver integrated business planning

Strategically investing in technology and data and analytics capabilities, and incorporating external data elements

Viewing planning broadly across the organization and reorganizing teams to optimize performance

Yellow Stairs

Move your continuous forecasting  approach forward

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