Integrate forecasting to manage ‘never normal’

We’re living in a time of unpredictable change: an environment the entrepreneur and business author Peter Hinssen has called the “never normal”. This is a period where we no longer expect a return to orthodox trading conditions but instead must deal with a series of seismic shocks.

This puts pressure on all of us to respond, rethink and reform. Service-based organisations can struggle in this uncertain environment because they are so vulnerable to fluctuating supply and demand.

At the heart of the action

The uncertainties of never normal put CFOs at the heart of the action. To react to change fast, they need to learn to steer by numbers, using data to make unemotional decisions based on inarguable factual evidence. Of course, data-based decision-making based on a single source of truth is widely advocated these days, but to make it work, the data needs to be well managed.

The problem here has always been that data is rarely standardised, integrated and reliable. Operational rigour is needed to ensure every data element is processed correctly. If not, the domino effects can ripple downstream. Even a simple missing timesheet or an unbilled customer will skew reporting.

Joining up forecasting, planning and analysis (FP&A) tools with enterprise resource planning (ERP) systems presents an opportunity to achieve the consistency CFOs need to keep their finger on the pulse of business conditions.

At a time when so many factors are in play, CFOs are in the best position to work with HR, IT, logistics and other functions to deliver visibility across the organisation against unbiased key performance indicator (KPI) benchmarks and evaluations.

Digital transformation

According to McKinsey Digital, 64% of business leaders believe they’ll need to build new digital businesses to be economically viable by the end of this year. Service-based operations are no different. Digital finance transformation is needed to survive in the never normal. Creating an enterprise platform for project-focused organisations will allow them to manage every step of the project journey:

1. Forecast: Respond to opportunities and changing priorities by using “what if?” scenario planning to model cost, profitability, and outcomes.
2. Plan: Use tools and processes to create planning systems that can adapt to changing circumstances.
3. Integrate: Driving ERP and FP&A from a single platform is critical to creating reliable data ecosystems.
4. Execute: Adaptable workflow automation gives organisations the flexibility to act and adapt. CFOs can also enhance billing with new approaches such as automated invoicing and natural language assistants.
5. Review: Advanced analytics can uncover hidden opportunities and identify and track performance indicators. Standardised business logic and KPIs help people at all levels of the organisation to understand their financial contribution.

Visibility and control

Many service-based organisations are still using outdated technology. Research by PwC found that 42% of finance teams that are still heavily reliant on spreadsheets report a high ratio of late payments overall.

To address this issue the top three priorities to improve forecasting accuracy are: greater communication across teams, followed by improved planning for different scenarios and greater investment in forecasting technology.

Other research shows that investment in digital tools and processes pays off; Harvard Business Review reported that mid-market companies with a clear and comprehensive digital vision that guides strategic decisions grow 75% faster on average than those without.

Tech-savvy CFOs invest in tools that deliver this visibility and control across the entire organisation so they are aware of all factors affecting financial performance from costs from customer acquisition through to revenue, recurring services, upselling opportunities and the state of customer relationships.

Focusing one eye on the now and one eye on the future is vital if leaders are to deliver projects on time and on budget. The right functionality will enable them to create trusted reports with meaningful commentary, providing insights and transparency for the board and investors – and to inform and motivate employees.

Times of rapid change also present new opportunities for organisations that read the changes and interpret fresh insights. With the right tools and processes in place, CFOs can help the whole organisation remain agile and profitable, whatever happens in the never normal. As McKinsey said back in 2021: “Tech-savvy leadership helped set top performers apart – and will be even more valuable in the future.”