The political climate across the western world is changing. Brexit, Donald Trump’s inauguration and upcoming elections elsewhere in Europe have all led to increased economic volatility. As a result of this, 90 per cent of CFOs now claim the level of uncertainty facing their business is above normal, high or very high. To effectively manage a fluctuating economic climate, finance teams must look towards the vast amount of data they generate to provide a detailed overview of their financial footing.
For too long this data has been overlooked, with many organisations still opting to utilise spreadsheets for complex business processes. While this may be adequate for micro-businesses or single person operations, when this technology is scaled to larger companies it can easily result in errors and lost data. These inaccuracies could cause catastrophic damage should business decisions based on this data fail. During uncertain times, it is therefore imperative that firms undertake an in-depth analysis of their financial performance, preparing for the worst, and planning for the best. To effectively achieve this, real-time reporting will help translate the copious amounts of data a firm collects and convert this into detailed, reliable insights.
A new approach to financial forecasting
For companies willing to proactively review their budgeting and forecasting processes, a shift away from the annual budget is a starting point many will consider. While it still plays a valuable role through its focus on outlining broad themes, including revenues, costs, and organisational KPIs, rolling forecasts are increasingly utilised to provide far greater detail, feeding into yearly budgeting processes. This allows finance teams to clearly identify the strategic direction of a business, supporting effective decision-making and enabling rapid change when required.
To accomplish this, FDs and CFOs must extract greater value from technology, ensuring they have access to critical business intelligence when it is needed, rather than when the annual budget is drafted. Through a greater utilisation of innovative technology, businesses can effectively plan around market volatility, enabling agile reactions to issues that may once have not been addressed until the damage was done.
The in-depth analysis that modern technology provides offers financial workers the ability to plan ahead for change, meeting any challenges head on and positioning their business for success. The political climate across the western world is changing, from EU regulations set to be implemented prior to Brexit and the implications of leaving the EU itself, to shifting relationships with the US in light of the new Trump administration. The key to success will sit with just how flexible a business can be in meeting the new, varied challenges that emerge.