Why is reforecasting so painful in many organisations? Why does the word “reforecast” strike such fear into some people’s lives?
I don’t mean so much the content of it – let’s face it, lots of numbers are going to be terrifying at the moment – but more the process itself.
I’ve been working with a couple of smaller charities lately where I’ve asked about reforecasts and you can see the pain in the CEO’s eyes. In these cases I can understand it to a certain degree. Without staff who do this day in day out, it can be a challenge to find the time or headspace to devote to it. However, it’s also been a problem when I’ve worked for large organisations with loads of staff, where The Great Reforecast is an event that takes several months and is out of date by the time it’s done.
I think it often boils down to poorly designed or poorly used systems. “How are you going to plan and reforecast” doesn’t get asked or prioritised during finance system implementation or process design. We tend to think about how we transact first and foremost with reporting in the mix somewhere. But interacting with that report, which is what forecasting is, is often an afterthought. It should not be difficult to reprofile a grant or amend staff costs quickly. But it often ends up that way.
The trick to good forecasting is, like cleaning, “little and often”. There should be a focus on what is material for your business or charity. In lots of charities this is staff costs. So I would always create a staff costs tool as part of any budgeting or forecasting process. Excel may be the best tool in many cases but it might not always be. It certainly needs good design to enable non-finance people to quickly plug numbers in and view their results.
A healthy understanding of materiality is also useful. I have helped reassure nervous budget managers by telling them I only care about changes to the nearest £x(000).
Ultimately as a Finance Director, my job is to make it easy for people to reforecast and plan scenarios. If you or the business find reforecasting painful, then you need to review your systems and work out why it’s so hard. It will repay your investment.
If you want a quarterly newsletter summarising latest developments in Excel and other things I've found interesting or useful, please sign up here. I won't use your data for anything else.