Forcasting Essay

2098 words - 8 pages

Financial Forecasting: Room for Improvement for People, Process and Technology IDG Survey Shows Collaboration Among Stakeholders Key to Accuracy
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Executive Summary Preparing an accurate forecast in this volatile business climate is challenging. Still, it is critical for businesses to be able to predict outcomes for the next month, quarter or year, and be able to respond quickly when the actuals vary significantly from the forecast. Forecasting may be equal parts art and science, but the most dialed-in enterprises report using a solid, collaborative process for generating accurate forecasts upon which they build their business.
IDG Research Services and CFOWorld.com recently conducted a survey of 306 global finance professionals. Most respondents report having a high level of confidence in their forecasts, and update those forecasts on a monthly or quarterly basis. Among the other interesting survey results are that more than half of the organizations responding have implemented rolling forecasts and measure forecast accuracy by evaluating how well the forecast maps to actual business results.
Other research findings, specifically certain geographical variations and differing conclusions in the survey results, bring up at least one issue with forecasting: analyzing forecast results compared with actual results may be a matter of perception versus reality. Forecasts are, by their very nature, educated and informed guesses. There may be much more of a psychological component to forecasting in terms of how forecasts are perceived, how rigidly they're followed, and how they may impact job performance of those whose responsibility it is to generate and maintain an accurate forecast.
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Introduction Forecasting is an essential activity for global enterprises doing business in this uncertain economic climate. While the process of forecasting may be equal parts art and science, the most highly evolved enterprises use a solid, collaborative process based on timely, aggregated data for generating accurate forecasts upon which they build their business.
Some companies use historical data; others try to use real-time or at least more recent data. Some forecast on a quarterly basis, while others go monthly. More rarely, some forecast on an even more granular weekly basis. Some produce solid forecasts that are accurate predictors of their actual business results; others struggle to gener- ate dependable, accurate forecasts.
Different organizations in various industries may handle forecasting in dissimilar ways, but there are certain standard, accepted practices. There are three aspects that come into play when generating a forecast: people, processes and technology. The right people must provide the right input in the right manner, and those finance executives charged with preparing a forecast must aggre- gate that input using the right technology. Each of those aspects must be involved to ensure that an organization's forecast is as...

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