Dynamic forecasting is a concept used in business to align company procedures and data over key business departments to develop transparent, agile, and accurate forecasting over time. If you normalize dynamic forecasting in your business, the forecasting will be standardized, more actionable, and automated. In practice, this means transitioning forecasting from a calendar-based method to an “always on” skill set that can be used as a management tool daily.
When things are proceeding normally, the future is not hard to foresee or at least anticipate. A budget and forecast might become useless in an instant if a company has to delay a product launch, make an unexpected acquisition, or lay off employees.
There is a lot of demand for finance departments to provide reliable predictions and regular adjustments to those predictions in today’s volatile market. The ability to make rapid changes to plans using real-time data and new insights is made possible by dynamic financial forecasting.
What is Dynamic Forecasting?
Dynamic forecasting will utilize available data, systems, and knowledge from the operation staff to extend the inputs and enhance the outcomes of the forecasting procedure. With enhanced visibility into modifications to the committed business in progress and the growth or decrease of current business, finance is now better equipped to handle any business situation.
How Does Dynamic Forecasting Help Business?
Supporting rolling forecasting
The annual nature of the budgeting and forecasting cycle is a major flaw in the conventional approach. Business plans based on estimates made at a particular point sometimes turn out to be erroneous, and annual forecast targets become outdated after only two or three months. Rolling forecasts eliminate this issue by allowing rapidly expanding businesses to develop adaptable strategies.
However, using spreadsheets to make rolling forecasts is tedious and inefficient. By using rolling projections, organizations can plan in real-time, reduce wasted time in the planning process, and equip their finance departments with the data they need to advise company leaders on strategic decisions that will propel the company ahead.
Creating an active feedback loop
By establishing a functional feedback loop, Dynamic predicting also considerably enhances predicting results. This improves the “connective tissue” between revenue-reporting departments like finance and analysis and revenue-generating departments like product development, marketing, and manufacturing.
Feedback loop uses automation to provide more exact revenue estimates, which are continuously refined using customer action and success data. Through improved planning, contracting, and execution, they can seal the revenue leaks, variances, and shrinkage that this information reveals. In addition, it helps management see how different factors in the supply chain affect production.
Establishing data-driven business procedures
Despite having the necessary data, many businesses struggle to predict the ramp-up of new customers or the run-rate revenue from current relationships. Customer Success teams, for instance, regularly interact with customers regarding product delivery, onboarding, installation, service difficulties, adoption, and usage. The account team may see if the customer is likely to grow, shrink, or churn.
Conclusion
If you want to keep up with the latest business trends, dynamic forecasting is the way. If you choose this route, you’ll have more time to investigate the aforementioned knobs and make more accurate forecasts. Real-time decision-making helps running business while removing inefficient and unconnected processes. As a result, in today’s ever-evolving corporate world, dynamic forecasting is more important than ever.
