The global economy is yet to fully recover from the impact of COVID-19. Meanwhile, the looming threats of a worldwide slowdown have made the process of financial planning a complex task.
In the current economic climate, even the most comprehensively laid-out financial plans need rethinking, requiring a reforecast a little too often.
Regular reforecasting requires a lot of time and resources if attempted manually. It would further strain the limited resources that companies are presently trying to make do with.
With financial planning software, reforecasting becomes an easily manageable task that can be completed with greater accuracy.
Challenges with Manual Reforecasting
Reforecasting is used by functions across the company, including Finance and Revenue teams to pivot in the face of change. Finance teams in particular use reforecasting to adjust budget forecasts to be more in line with actuals, while accommodating strategic changes.
When you reforecast, you do not alter only one or two elements of the budget, but you create a new budget with new projections.
As reforecasting essentially entails re-writing the entire budget, the process can be overwhelming for companies that lack the required resources and support. As market conditions evolve continuously, businesses attempting to reforecast manually face a host of challenges:
- Resistance to Change: The sheer scale of redesigning the entire budget leads to resistance from various sections of companies. As the budget becomes obsolete, employee confidence in it erodes, leading to wasteful expenses.
- Problems with Spreadsheets: In the absence of financial planning software, teams have no other option but to use spreadsheets. But spreadsheets are not optimal for frequent reforecasting as data is entered manually, leading to chances of errors. As a result, the spreadsheet models tend to break.
- Lack of Coordination: In large companies, there are multiple departments whose inputs are required for the reforecasting process. When done manually, it becomes tough to keep track of cross-functional data and get reviews from various departmental heads. Hence, the accuracy of the new budget would be compromised.
- Too Many Errors: Companies get huge volumes of data from multiple sources during the budgeting process. Processing this data manually is difficult enough the first time; during a reforecast, it gets even more complicated. As a result, there are chances of too many errors creeping into the new budget that it is unlikely to yield the desired results.
- Tracking changes: Sending spreadsheets back and forth requesting the concerned persons to share their inputs manually makes it almost impossible to keep track of the changes. Companies are unable to restrict access to data and monitor who is making changes in the sheets. As a result, it is not feasible to have an audit of changes, affecting the ability to trust outputs.
- Versioning is a nightmare: Versioning is a vital process to keep track of the different iterations of the budget. But when reforecasting is done manually, it becomes almost impossible to ensure accurate versioning for different variations of the spreadsheet with all the data.
Need for Financial Planning Software to Reforecast Accurately
Reforecasting has emerged as a vital operation as it not only keeps the company agile but also helps leadership take prompt decisions on key financial aspects related to the budget. Having financial planning software offers management the much-needed agility and flexibility to make frequent yet accurate reforecasts in no time. Some of the most important aspects pertaining to the need to have financial planning software are detailed further.
No New Surprises
Companies are already struggling with the new normal; hence there is no scope for any new surprises when it comes to budgeting. Financial planning software takes away the element of uncertainty from the entire process. Finance teams can run multiple what-if scenarios in minutes to identify key growth drivers. Moreover, they can produce various essential reports quickly.
Reforecasting can be necessitated by any major event that relates to the business, such as a new policy or losing a business partner. In such situations, reforecasting becomes imperative, but time is of the essence. With software, companies can quickly alter assumptions for a given situation, thereby expediting the entire process.
Financial planning software helps finance teams add new dimensions to financial plans within a few minutes. This functionality enables company leadership to easily build, maintain, and change financial models as and when required. Revenue teams are able to run models in a matter of hours with up to 20x fewer formulas as compared to spreadsheets.
Versioning and Data Access
With robust financial planning software, versioning is as simple as a few clicks. Leadership can easily monitor the data and restore any versions as and when required. Such software platforms also ensure better data security as management can restrict data access with a few simple steps. Thus, only those professionals with the required access are able to access the data or make any changes to it.
With robust financial planning software like Pigment, reforecasting becomes an effortless task. It is extremely easy to rebuild models by using the drag-and-drop feature for the application blocks created by the platform. This feature enables finance teams to easily update small components like formulas. These changes will then be automatically updated across the model, thereby reducing the time taken to create different financial models by almost half.
Single Source of Truth
Financial planning software encourages cross-departmental collaboration by creating a single source of truth. All decision-makers have access to the same data in real time. As all the data is stored in one place, various departments can collaborate to work on different models or approve them from within the platform.
Faster and accurate decisions
Decisions taken by management are only as good as the data on which they are based. In the case of manual reforecasting, the integrity of the data can be compromised, leading to ill-informed decisions. This is not the case with financial planning software, as decision-makers have access to accurate data in real time. Moreover, the in-built features in such platforms reduce the time taken to create multiple models and run various what-if scenarios is reduced to minutes instead of hours or days.
Reforecasting is integral to the budgeting operations for businesses in present times. But doing it manually is not possible as the multiple steps involved in the entire process necessitate the integration of financial planning software.
Companies must invest in integrated financial planning software that is compatible with the existing systems to usher in accuracy and speed into the reforecasting process.