After months of economic uncertainty, many boards and business leaders are now looking to the future and beginning to realize that a dynamic, flexible forecasting process can help to shape both immediate and longer term decision-making, manage crucial cash flow, and better equip businesses to predict and adapt quickly to changing events.
Based on a recent survey of 383 senior finance executives by CFO Europe/KPMG in the UK, Adapt to thrive: Forecasting and scenario planning recommends a simple but effective forecasting model that focuses on robust stress testing of "what if" scenarios. Survey respondents identified scenario planning as the single best way to improve business forecasting.
Other insights from the survey include:
- Sixty-five percent of respondents say that stakeholders are demanding more reliable information
- Despite changing market conditions, seven-in-ten respondents have not changed the data on which they base their forecasting and planning
- Over half of respondents claim that their enterprise resource planning (ERP) systems are not flexible enough to provide a reliable forecast.
Accurate and effective forecasting can have an incredible long-term impact on a business, bolstering the ability to identify new opportunities and manage potential risks. However, the survey suggests that forecasting rarely occupies a seat at the top table; instead, it tends to be viewed as a number-crunching exercise best left to the finance function.
Finance leaders can promote wider cultural change by placing forecasting at the centre of strategic decision-making. To achieve this, they should engage with the board and C-suite counterparts, ensuring that business plans focus on the things that really matter: activities that generate cash and drive profits.
(184kb) Adapt to thrive: Forecasting and scenario planning