Accurate forecasting is difficult at the best of times. Any number of unexpected events can arise between setting out the budget and closing the books at the end of the year. Creating regular reforecasts throughout the year can lessen the impact, but how can a business cope with major upheavals resulting from something like the recent EU referendum? Volatility in the foreign exchange markets, a drop in consumer confidence and a changing relationship with the single market all contribute to great uncertainty in the business environment.
Whichever side of the debate you stand on, there is no doubt that Brexit will lead to considerable disruption in the short to medium term. However, forewarned is forearmed, and the best thing that small and medium-sized businesses can do to prepare is to ensure that they take full advantage of all available data and the best tools when making their plans. Here at Golden Orb, we specialise in helping businesses to deal with uncertainty. There are a number of tactics we employ to ensure that we are able to give our clients the clearest possible view on future developments:
- Our business planning tools can be fed automatically with the latest data from internal and external sources (e.g. market pricing, web analytics and Google search volumes). This ensures that businesses are as well informed about the current commercial environment as they can be and pick up trends as soon as possible.
- Our tools typically reforecast automatically based on the latest data, meaning that full-year reforecasts are available instantly, without the days of effort usually involved. This ensures that forecasts are dynamic and always incorporate the latest information.
- Sophisticated algorithms can be deployed to update demand and cashflow forecasts, and statistical analysis allows businesses to understand the uncertainty around the projections and to plan accordingly.
- ‘What-if’ tools provide information on a range of possible scenarios, allowing businesses to make contingency plans for more extreme outcomes
Nobody can know the future, but in business it is nevertheless essential to make forward-looking plans. Companies with long lead times need to be able to place orders with a reasonable amount of confidence that they will be able to sell the product and not end up either with a lot of stock on their hands, or a large number of unfulfilled orders. Importers and exporters need to be able to take a view on the range of likely exchange rates, their impact on revenues and costs, and the value of hedging. All businesses need to be able to forecast cash requirements and for those forecasts to be closely linked to the sales forecast, particularly as that changes over time.
Although the future is unknowable, we would argue that a combination of hard data and rigorous mathematical analysis provides the best hope of making a reasonable estimate. There are a number of relevant resources on our website which might be of interest:
- Blog post on the benefits of integrating planning with reporting
- Information on Golden Orb’s tools for planning and analysis
- Download our e-Book on becoming a data-driven organisation
- Various technical white papers on using statistics to manage uncertainty
- Technical post on the difficulties of integrating data from multiple sources