COLUMN: TIMELY DUE DILIGENCE - MULTIPLE FORECASTS AND DATA SOURCES
In the spring and early summer of 2023, exacto conducted a survey with the participation of CFOs and CEOs representing 50 Danish companies. We did this to uncover the status of budget and forecast processes in 2023, how they are used to support management's work, and finally how the companies expect to utilize the technological opportunities that support the processes in the future.
Over the summer, we will share some of the various insights that the survey has provided in a small series of columns. This is the second column in the series. Here you can read the first column "From paper to platform - from analogue to digital".
Timely due diligence: Multiple forecasts and data sources
For several years, the budget has been a stable component in management's toolbox for effective management and control. In recent years, however, we have seen that forecasts, simulations and scenarios have started to gain more and more traction. This is confirmed by the survey, where 69.4% of the surveyed CFOs and 87.5% of CEOs state that they use the forecast to supplement the budget.
The development has also shown signs that companies want to use forecasts, simulations and scenarios with increasingly shorter intervals and demand solutions that can support this in a simple, efficient way, preferably with full automation.
The insights from the survey confirm this impression, but at the same time emphasize that there is a need for digital solutions that take advantage of the opportunities imbedded in a platform-based setup.
Management and due diligence
The management team in the companies has the ability to make timely decisions on a data-driven and correct basis high on their priority list.
When asked about the extent to which they continuously draw actuals, in order to be able to make data-driven decisions and make timely adjustments, 69.5% of the CFOs who answered the question indicate "Very high" or "High".
Among CEOs, 83.3% answer "Very high" or "High".
Frequency
The most common frequency of extracting forecasts is quarterly or monthly with respectively 33.3% monthly and 33.3% quarterly for CEOs and 23.1% monthly and 34.6% quarterly for CFOs.
However, if they had free access to pull as often as they wanted, 50% of the CFOs who answered questions indicated that they would pull forecasts on a monthly basis. This figure is as high as 56% for CEOs.
8% of CFOs and 11% of CEOs would like the frequency down to a weekly basis.
Consistent reason for not pulling more often is that it will be too time consuming. They point out that it often requires a certain amount of manual handling to ensure that the correct and up-to-date data is available.
However, it is to be expected that shorter intervals for running forecasts, simulations and scenarios will be implemented. In the survey, 90% of the CFOs who answered the question indicate that the access to being able to continuously draw actuals will be something they will focus on in the future. 100% of CEOs respond accordingly.
Data sources
The respondents in the survey thus indicate that time is a challenge in connection with using the forecast to supplement the budget. This emphasizes the need to design platform-based solutions with a high degree of automation. But when they are given the opportunity to qualitatively formulate challenges, extracting and updating data from external sources is pervasive. Two respondents put it this way:
- "Updating all the variables that come from many different sources."
- "Getting correct figures from others - as well as we have a lot of costs which are index-regulated, and it is especially difficult to predict at the moment".
This can be seen as a clear indication that the trend towards leaving the manually handled and locally anchored Excel sheet in favour of a platform-based solution will continue unabated.
With a platform-based setup, it is possible to integrate with external data sources, from which updated data can be pulled minute-by-minute – this could be exchange rates or fluctuating prices in the value chain – so that simulations or a forecast provide an accurate decision-making insight.
