Experienced business leaders know that accurately predicting future financial outcomes is a highly complex challenge. It’s a process not to be left only to logic that is based on reviews of combined financial reports from the past.
Forecasts can be rendered obsolete by any one or more of a vast range of emerging variables. Internal and external business environments for growing companies are characterized by ever-changing conditions on the ground. This management reality calls for the kind of stable and inclusive dynamic forecasting framework that NetSuite provides.
What is Dynamic Forecasting?
Forecasting is the process of analyzing a business’s revenue and expense trends to predict future results. Forecasts are produced routinely to provide revenue and expense projections. The practice is used to update KPI metrics and provide insights into the business’s performance for goal setting and strategic planning.
Dynamic forecasting is based on real-time data vs. just historical performance reflected in annual financial reports. Dynamic forecasting is a rolling predictive model that uses continuously changing indicators to generate predictions, usually for making quarterly or monthly projections.
What Impacts Financial Forecasting Accuracy?
There are many potential obstacles to accurate forecasting. For just some common examples, unexpected internal and/or external impactors, like subtle market or industry changes, local or broader economic shifts, production backlog, customer service issues, supply chain problems, communications glitches, employment market issues, sudden acquisition, departure of key individuals, weather events, etc.
Organizations that are still depending on outdated approaches to forecasting, such as building and studying spreadsheets, are ill-equipped to collect and analyze real-time data continuously. On the contrary, their data collection is static because it’s closed off from available real-time updates needed to keep it relevant. Consequently, the KPIs reflecting such stagnant information may retain little meaning or value for forecasting beyond very short timeframes.
Companies that take advantage of dynamic financial forecasting methods are better positioned to identify and respond effectively to conditions that are continuously evolving. They are empowered to adapt with greater agility to changes. Capturing new insights from such fresh data requires updated processes facilitated by modern operations and financial planning information technology.
Dynamic Forecasting Best Practices
Using a centralized financial planning solution is the current industry standard. Integrated systems that seamlessly sync data streams between a company’s ERP platform and its financial management team enable forecasters to draw current data directly.
They can utilize real-time operations, marketing, and sales data, and results from market analytics to generate forecasts for planning. This eliminates the old cumbersome, error-prone system of manual data transfers between departments and branches with non-networked data management systems.
Centralization provides greater transparency for stakeholders, increased accuracy in forecasts, and stronger confidence in this critical component of the planning model. It delivers faster information output, giving the company a substantial advantage in responding to unanticipated opportunities.
How Does NetSuite Help Improve Forecasting?
As emphasized, repeatedly updating and manually consolidating spreadsheets to formulate a forecast is laborious, time-consuming, and invites errors. NetSuite’s forecasting, planning, and budgeting platform integrated with your ERP resolves those efficiency problems.
Further, the methodology is more advanced than the outdated approach of putting together forecasts based largely on historical information. NetSuite applies these forecasting strategies:
- Driver-Based Forecast Model: This approach uses analytics encompassing the organization’s activities that impact revenues and expenses to formulate financial forecasts of its future financial performance.
- Rolling Forecast Model: Whereas annual forecasts are, at best, too often useful for just a few months, rolling forecasts generate planning queues that evolve in their applicability as updated information flows in and priorities must be adjusted.
Using NetSuite for Dynamic Forecasting
Without wasting time on manual data loading, consolidation, and formulating, finance management can focus more energy on robust and impactful financial analysis for strategic planning. The NetSuite forecasting engine automatically collects and applies operational KPIs and financial data from the NetSuite ERP for faster and more accurate financial forecasting. Business owners and management teams can quickly generate what-if scenarios for analysis and discussions.
Further, NetSuite eliminates the typical problem of misaligned spreadsheet versions across departments. With outdated processes, that situation continuously causes outdated information from one or more sources to skew forecasts. That can leave strategic plans disconnected from operational realities. Using NetSuite, forecasters can generate up-to-the-minute status reports from fully integrated sources.
Why Is NetSuite Today’s Preferred Forecasting Software?
NetSuite experts have designed and implemented thousands of internally networked resource management and financial planning software platforms worldwide for over 20 years. With the NetSuite ERP platform and forecasting software tools, your organization and its customers benefit from an information management system that spans the customer lifecycle.
That means optimizing the customer experience through seamless knowledge sharing across departments, from sales to production to customer service. It also means incomparable power to strategically plan for generating growth and fiscally strengthen your enterprise.
To learn more about NetSuite and what it could do for your business, reach out to the team at AccountingDepartment.com today. AccountingDepartment.com's client accounting services are here to serve you and your business!