More frequent re‐forecasting is becoming an important topic on corporate agendas and is seen by many to be the only way to keep financial performance on track at a time when revenues are becoming less predictable. The paper aims to investigate this topic.
For the past four years ALG Software has commissioned a study of the re‐forecasting practices in a sample of the top organisations in the UK by revenue. The objective of the study is to benchmark how frequently the UK's leading organisations currently re‐forecast and what their goals are for the future.
The results show that the majority of organisations remain dissatisfied with the frequency with which they re‐forecast and wish to re‐forecast more frequently. However, the findings also show that many organisations feel that they cannot re‐forecast as often or as quickly as they would like. In fact, evidence suggests that little, if any, progress has been made during the last four years since this survey was first commissioned. This is due to either the amount of time it takes operational line managers to re‐forecast their resource requirements, or the amount of time it takes the finance function to complete a round of re‐forecasting. The type of application used for budgeting and re‐forecasting appears to make little difference to the time it takes organisations to produce an annual budget or complete a re‐forecast. Central to this issue is the use of non‐financial or “operational” data that predicts future resource requirements, and the limitations of the budgeting systems that organisations currently employ. Regardless of the type of application used for budgeting or re‐forecasting, much of this modelling is still done off‐line on spreadsheets.
The paper is of value to finance managers considering choosing a new budgeting application who will need to ensure that the type of operational modelling of non‐financial driver data, currently done offline on spreadsheets by line managers, can be seamlessly integrated into the central budgeting model.
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