Forecasting in uncertain conditions

Briefing note

Summary

Recently, the CBI/PwC Financial Services Survey found optimism in the

financial services sector surged in the three months to the end of September

amid signs of a strengthening economic recovery across the UK

However, in looking at CFO optimism on a global scale, a recent report by

Deloitte found that while North and South American CFOs have a favourable

outlook on the economy, their British counterparts are more pessimistic (40%)

than optimistic (32%).

So, how are finance teams supposed to prepare forecasts and plans when

confronted with conflicting information about the current state of the economy?

The role of the FD

While many recent surveys of senior executives seem to point to optimism with

respect to the economic recovery, other economic indicators suggest that a full,

sustainable recovery may, as yet, be elusive.

And as many of us embark on the business planning process for 2014, it’s

difficult to chart a path based on the divergent assumptions of economists and

experts worldwide.

The planning and forecasting process is further complicated by the fact that

almost everyone has an opinion on what the coming year will bring: things will

be better; things will be worse; or things will be much the same.

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This ambiguity is compounded by the fact that companies that have “tightened their belts”

over the past five years, and introduced restructuring and downsizing initiatives to cope with

a slower pace of growth, are now starting to show signs of “austerity fatigue,” and are

anxious to embrace a renewed period of growth.

The role of the FD in this climate is to strike a balance between identifying entrepreneurial

opportunities and determining a clear path for the company that identifies the financial and

business risks.

These early signs of optimism and potential recovery should be welcomed - - with caution

and a pragmatic approach to identifying benefits and opportunities in the current situation and

potential for growth and expansion.

A wealth of corporate knowledge

While decision-makers should be aware of external factors and analysis, those of us who are

not economics analysts, should probably avoid relying on the range of expert opinions as the

basis for our business planning and forecasting.

However, there are productive steps that can be taken to ensure that your company is

positioned for growth and able to capitalise on any existing opportunities.

Every business has a vast resource of company and cultural history that may not be being

exploited to its full potential.

Historical information on seasonal trends, vendor and contract pricing, customer queries and

orders placed can all provide a historical context which can provide a foundation upon which

to build or revise your next business plan.

But, the next question becomes how to gather all the pertinent data you need and gain

valuable insight into all that information.

The case for automation

Many organisations report that they are looking for greater insight into productivity levels. And

many also report frustration over spending too much time on gathering data and not enough

on analysis and forecasting. This results in missed opportunities and a failure to capitalise on

changes in the landscape, such as reduced costs in capital equipment, premises and

supplier terms.

Today’s decision-makers have higher expectations and know that they must be aware of and

capable of responding to market fluctuations, competitor activity and other pressures on the

business. They need accurate, up-to-date information on the current performance of the

company to be able to significantly improve productivity through streamlining processes and

maintaining costs.

TCM Infosys Ltd.

info@tcminfosys.com | +44 (0) 845 50 50 350 | www.tcminfosys.com

But, while back office systems often take a backseat to operational systems, proactive FDs

are always looking for ways to maximise their use of technologies to reduce duplication of

effort and manage change effectively.

Automated processes enable the finance team to conduct detailed analysis and develop

enhanced reports that deliver real insight into the business.

With a system that automatically integrates data from disparate sources, time spent on

routine reporting, such as month-end or year-end is dramatically reduced, freeing up the

finance team to spend more time on more strategic activities.

The automation and distribution of KPIs also mean that decision-makers can routinely

monitor performance and refine strategy to ensure that the business is on track to meet its

objectives.

The system provides both a historical and current review of results and performance and

allows the finance team to forecast with confidence, based on known, actual results.

And with unlimited capacity to conduct “what if” scenarios, the finance team can now produce

a range of options to decision-makers to demonstrate the effects of specific changes in

internal and external conditions.

This level of detailed analysis helps your organisation recognise subtle trends and patterns,

so you can anticipate and shape events and predict potential outcomes. Now you can drive

growth, control costs and identify risks that are a threat to costs and identify risks that are a

threat to your business and take corrective action.

The more seamlessly the financial system integrates with operational and legacy systems,

the better the end result will be, allowing decision-makers to examine the true costs of

running their business across multiple channels, and allowing FDs to calibrate regional and

country differences and factor them into the forecasting process.

About TCM TCM’s forecasting software allows you to forecast and reforecast, based on integrated and validated data, giving you instant access to information to make modifications easily as conditions change. TCM streamlines the planning, budgeting and forecasting process, reducing the time spent by your management and finance teams, and removing your reliance on error-prone spreadsheets. Everyone involved in the forecasting process can see comprehensive, updated information and make informed decisions, based on reliable information, reflecting changes in your business environment.