All companies apply some sort of business forecasting method no matter how rudimentary or advanced. Planning for the future you think will happen ensures you’re as prepared as possible for whatever comes your way. Read on for 7 insights that will help you reap the most benefits out of your business forecasting processes.
1. Your business objectives are just as important as the forecast itself
Forecasts are a means to an end. So it’s critical that you define that end. For example:
- Are you looking to increase sales for a physical product? A service?
- Are you focused on understanding or cutting your expenses?
- Lastly, who are you presenting your forecasts to?
The answers to questions like these should not affect the numbers or your forecast. But they’ll help you decide what numbers to look at, the best way to organize your data, at what level your analysis should take place, and what you ultimately do once you’ve come up with your forecast.
2. Blind trust in your data is dangerous
Don’t be fooled into thinking “the numbers don’t lie.” Data can be inaccurate, and algorithms can be flawed. Many tools have automated checks that help detect anomalies, but as Bain & Company suggests, it’s also important to know what data you should be collecting and whether everything looks right (or wrong). This is where the demand planner’s judgment and experience is invaluable. Careful monitoring helps detect issues before they become too costly or messy to fix. If a forecast looks wrong, trace the steps taken and determine where things went awry.
3. In forecasting, there is safety in numbers
Relying on one person’s forecast is a common mistake in business forecasting. Many companies rely on lean teams and old technology to plan for demand. But, as Deloitte points out, groups may actually be better at accurately predicting events than any one individual is.
So it’s worthwhile to devote time, energy, and resources to investing in software and developing well-defined processes that enable company-wide consensus-building. Our Atlas Planning Suite, for example, provides you with a platform for collaborating that even works with mobile devices, so you can communicate with colleagues wherever they are.
4. The margin of error is an important part of your forecast
Your forecast will only be accurate once in a blue moon. And even that may be a bit of a stretch to say. But forecasts are nevertheless valuable, as they guide business decisions, such as how much inventory to stock and how to allocate resources, including labor. To make them even more actionable, anticipate a general margin of error. With this additional information, you’ll be able to plan for the best and worst case scenarios. That way, you’re less likely to be caught off guard by an inaccurate prediction.
5. Excel is powerful, but not enough
It’s easy to understand why many young companies use Excel: it’s inexpensive, and there’s not a steep learning curve to get started. The software also has some powerful forecasting features — which can be enhanced when you use our ForecastX plug-in. But there are limitations. For example, it’s designed as a single-user tool, which makes for manual and time-consuming workflows. Simply put, you’ll quickly outgrow Excel, especially because today’s companies need to be more responsive than ever. To remain competitive, you’ll need software that incorporates the latest in automation, predictive analytics, and other AI-based technologies.
6. Likewise, historical forecasts can only take you so far
Starting with accurate and complete data about past demand is critical. With this, you have a solid starting point for your statistical baseline forecast. But remember that past performance isn’t always the best indicator of the future. When forecasting, it’s just as important to account for shifting consumer attitudes, your competitors’ actions, market events and other economic trends, and even the weather. And while you can do this on a limited basis through manual processes, it becomes much easier when you use a software solution with predictive capabilities.
7. Being able to quickly and easily visualize the data is valuable
What’s more efficient: looking at row after row of numbers or a simple bar graph? Having tools that translate your data into easy-to-read formats helps you understand at a glance how different pieces of information relate to each other. More importantly, it makes the data actionable. When you share your findings and forecasts with everyone else in this way, everyone can see where the company stands at present and collectively make well-informed business decisions about where you want to go.
While business forecasting is imperfect and may seem daunting, getting this process right is key to your continued success. Fortunately, there are ways to make things easier on yourself and your company, including investing in technology that takes care of the heavy lifting for you. Do you want to find out all the ways technology can help with business forecasting? Schedule a free consultation appointment with one of our Forecast Xperts today.