Flow Capital : 5 Steps to Financial Forecasting in Uncertain Times

Although strategic finance leaders are veterans at planning in the face of uncertainty, some periods are more uncertain than others. You can't always plan for everything, so it's normal to feel some added pressure these days.

Successful uncertainty planning ultimately comes down to being able to quickly revise financial and operational plans by leveraging your data and analytics capabilities.

1. Leverage Scenario Planning

As mentioned before, scenario planning is a great way to test the implications of your business plans against assumptions about existing and future scenarios. Making agile models will also help you assess the impacts of those things on metrics such as revenue, costs, and cash flow. Scenario planning is an effective way of focusing in on critical metrics and their impacts on your company's performance, providing you the insights you need to make tough decisions quickly and confidently.

2. Adopt Agile Forecasting

Agile forecasting is the best way to adapt your business quickly, consistently, and intelligently to unexpected changes in market conditions. It involves being able to re-forecast on the fly based on real-time actuals and business drivers. Identifying key performance trends on-demand and modifying plans quickly is key to providing business leaders a reliable prediction of how market conditions today will influence the bottom line.

Here are some key things to implement:

• Use historical data and your most recent actuals to guide re-forecasting
• Re-forecast at a frequency that makes the most sense (e.g. quarterly for large operational expenses; weekly for cash flow)

3. Cash is King

Ensuring your business has enough cash on hand to weather downturns and periods of uncertainty is a responsibility every finance person has. Effective cash management is the key difference between weathering the storm or being sunk by it. While scenario modeling around cash flow should be a natural priority, here are a few other things to consider:

• Assessing cash flow on a weekly basis
• Providing management with digestible dashboards, data, and other analytics that will facilitate the decision-making process
• Examining all levers at your disposal (e.g. raising additional debt, hiring and headcount decisions, etc.)

4. People, Processes & Technology

People: Lean on members of your team that can combine their skills in technology and financial management principles in order to develop optimal solutions. Additionally, you should be speaking with your people on the ground who can give you instant insights, which may otherwise take weeks to be reflected in the metrics you track.

Processes: Capture, store, and aggregate all of the data necessary within a tight and streamlined process to make thoughtful business decisions.

Technology: Data accessibility, analysis, and visualization are critical components to turning data into insights and presenting them to management in a way they can easily understand and put into action. Combine internal and external, financial and non-financial data into a single source that can be easily accessed for a full view of the business. After analyzing the data, use data visualization tools such as Microsoft Power BI or Tableau to present the data in a way that is compelling and easy to digest.

5. Communicate Often and In Detail

A common theme throughout this article has been to communicate with your company's leadership team on a frequent basis. Each meeting should be used to take a detailed look at what the business is doing, what metrics are moving, and what your data is telling you.