Forecasting in life and business

Forecasting in all things is a delicate balance between what we know and what we can learn, and it is used to guide us and help us plan in both life and in business. There are some elements that are common to all forms of forecasting and the similarities might surprise you.

Let’s begin looking at modern weather forecasting. It uses a combination of technology and computer models with human input in the form of observation and knowledge of trends and patterns. But there are a number of variables such as wind direction and temperatures that are so variable that it can make forecasting past a certain point impractical and increasingly inaccurate and the ability to acknowledge that, and remain flexible and agile in your ability to recognise and respond to it can make a big difference to the outcome.

Financial forecasting is no different. Using the right technology and software will go a long way to helping you accurately forecast the financial future of your business. But just as with weather forecasting, there is a definite need for the human element that can keep track of ever shifting variables in their environment that no computer can be aware of.

New competition entering the market, a decline in interest from customers in certain products or ranges, what elements occurred in this year that are highly unusual and do not lend themselves to helping to calculate what will occur in the coming year – these are things that only your staff can answer and taking this information into account will make your forecasts far more reliable. Ensuring your software allows for ongoing adjustments for unexpected variables will further increase the validity of your information.

Accurately forecasting the weather becomes increasingly important when you consider the many ways in which it affects our lives. Farmers use the predictions to plan for the planting and harvesting of their crops which directly affects our food chain and further along affects trading and the economy. Airports use local and to a degree international forecasts to safely schedule flights and flight paths. Towns and cities use it to keep track of major weather events from earthquakes to tsunamis to hail storms to droughts, using the information to keep all of us safe and protected from the worst possibilities. On a day to day basis, we use it to choose what we are going to wear and what activities we will do.

An accurate financial forecast will allow you to properly plan for most aspects of your business. The information will affect the number of staff you can hire or may need to let go; it will tell you if you can invest in new products or technologies or if you are going to need loans from others to cover your day to day expenses; it can help to predict your expected cash flow amounts or identify your risks to allow you to better manage them should they arise; it can tell you whether you are looking at business expansion or having to shut down one of your branches.

From daily decisions to long term strategies, accurate forecasting can make your life and your business more manageable. It can never be the only tool you use, but if you utilise your resources properly and allow for the possibility of change and continued input, it can form a strong basis from which to build. 

Alerting you to the power of alerts

It is all fine and well that you have embraced the shift in managing budgets by getting input from your staff from all levels of your organisation and it will undoubtedly ensure your budget and planning will be far more accurate and the staff will feel more empowered by their involvement.

However, empowerment does not change the fact that your staff are busy with their day to day activities, ensuring the business is on track and growing, and you may face a few problems getting them to prioritise accessing the system and reviewing the numbers. Providing the access and requesting the input is not going to get you very far if your team “hasn’t had time to look at it yet” and therefore can claim ignorance of any updates or changes.

As opposed to having to chase staff to get them to keep an eye out for any changes on a daily or weekly basis, it is much easier to set up pre-programmed alerts that allow you to push data directly to the relevant people via an email. This will ensure key people are kept aware of critical business information in a convenient format suited to their lifestyle, at a predetermined time.

While not all systems will offer this, there are definitely those that do, including idu-Concept, so keep your eyes and ears open when reviewing additional modules for your financial software.

Ideally, your alerts should be able to be controlled by the administrator or the user, depending on the needs of the business and the individuals involved. Decision need to be made from determining when an alert is triggered (whether the threshold is a transaction, balance or variance that affects the user), to scheduling the timing of the notification and the repetition of the alerts.

On one hand you don’t want the user to be able to override or dismiss the reminders before they have acted on them, but on the other if the user sets the parameters themselves, they are more likely to choose what works for them and then follow through.

Whoever makes the decision, the software should allow them to easily make some further adaptations. From identifying socially acceptable times to receive notifications (to avoid easy-to-miss emails’ at 3 in the morning while allowing for different time zones for international use) to activating the alert from a predetermined point in time (it would be pointless to notify users that they are under budget daily from the 1^st of the month when salaries are only paid on the 25^th).

Knowing your staff and understanding their challenges and how best to provide them with what they need is as important to empowerment as giving them the responsibilities in the first place.