Leveraging modern technology to create intelligent forecasts at scale

Presented by Planful

If we’ve learned anything about financial planning in the last few years, it’s that past performance is not the sole indicator of future performance. The economic unpredictability we’ve experienced accelerated the need for organizations to become more agile, and while CFOs are still engaged in the functions that traditionally defined the role — such as optimizing for control, transparency and visibility — they are now being tasked with taking on new responsibilities that enable organizational agility. These responsibilities require modernization and digitization.

While finance teams continue to produce forecasts and generate statutory and board reporting, C-suites are now asking for analysis on more complex options, all while providing strategic guidance of holistic operations. To meet these demands, financial teams are turning to advanced technology to automate routine finance department tasks, free financial planning and analysis (FP&A) staff to engage in more strategic work and bring more commercial and operational data into the planning process. Artificial intelligence and machine learning are being widely adopted to help organizations drive greater agility.

How data complexity makes forecasts at scale a challenge

In a volatile environment, it’s more important than ever to create accurate and comprehensive financial forecasts. It’s critical to gather insights from department leaders, who have the best insight into their operations and outputs. While CFOs have always had a firm grip on financial data, they need to fully understand operational drivers from other parts of the business to create the most accurate and integrated forecasts.

For example, metrics on marketing qualified leads, sales accepted leads, conversion rates, etc., are eventually converted into pipeline numbers to create sales forecasts. Finance uses sales forecasts to create revenue forecasts. When the finance team delves more deeply into operational data, they are able to produce financial forecasts that are closer to real-time and far more accurate. With a more accurate forecast, you can make more confident decisions with greater agility, such as investing that profit into opening a new warehouse or manufacturing facility or increasing your hiring velocity. 

But the additional complexity that operational and commercial data introduce can make scaling up a challenge. The data available for analysis and inclusion has multiplied — generated from teams across the business, such as sales, marketing, logistics, warehousing, HR and operations. Adding commercial and operational data, while necessary to achieve greater accuracy, make it difficult to capture and integrate information at speed without advanced technology. Fortunately, technology is ready for the expansion of the CFO role.

Smart technology layer brings transformative new opportunity

CFOs who team up with business unit leaders from across their companies are gaining access to operational and commercial data that delivers insight on what drives progress toward business objectives. This can happen at the operational data level, as indicated with the sales pipeline example referenced earlier, but insights are also present in expenses and costs.

The more granular CFOs can get in operational data, the more accurate the cost basis of the forecast gets, creating a reliable reflection of the company’s past, current and future states. A technology platform that builds in forecasting functions at the expense account or general ledger code level, allows CFOs to roll all of the relevant business metrics into more accurate forecasts.

From the finance department’s perspective, data has always been king. But as technology transformed the way businesses operate, other departments quickly caught up and then surpassed finance, at least in terms of the volume of data produced. There’s a growing amount of data to analyze, and a smart layer of technology on top of the data can streamline and automate analysis, allowing the finance team to not only create more accurate forecasts but also adjust quicker during those moments of uncertainty.

And that’s where the opportunity lies because the goal is greater business agility. By making their organizations nimbler, CFOs enable the business to respond more quickly to external market forces and pivot faster in response to internal innovation, optimizing for control, transparency, visibility and agility. With modern technology that enables intelligent forecasting at scale, agility is within the CFO’s grasp.

Dig deeper: Learn more about creating intelligent forecasts right here.

Sanjay Vyas is Chief Technology Officer at Planful.