More CFOs are coming to recognize that as post-pandemic volatility mounts, leveraging opportunities to employ next-generation forecasting approaches has become the X factor that is elevating high-performing finance groups, and leading companies, above the pack.
Next-generation capability differs from traditional forecasting in fundamental ways. With a traditional approach, the finance team collects a stable set of fixed costs , demand projections and other inputs—primarily from internal sources—to generate sales and revenue projections. By comparison, more advanced forecasting methods—what we term next-generation forecasts—are dynamic in nature.
Sustained bursts of economic, political, social and environmental upheaval require finance groups to enhance their forecasts to become continuous based on automatic data feeds, equipping internal stakeholders throughout the organization with the real-time financial insights they need to make crucial decisions, often under pressure. The pandemic was just the latest example of a catalyst to such upheaval.
There are plenty of reasons why CFOs and their finance groups who have yet to modernize their traditional forecasting capabilities should initiate these efforts:Ongoing supply chain disruptions, deficits of raw materials, skills shortages and other disruptive constraints make traditional sales and revenue projections less reliable. Just because a contract or an agreement is in place does not ensure whether and when a company can deliver on that agreement before it expires.
Cloud-based automation and advanced analytical tools enable planning teams to produce targeted forecasts and reforecasts quickly and as needed, while limiting the need for manual work during a widespread finance and accounting talent crunch.
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