When forecasts fail: The high cost of inaccurate forecasting

As a finance leader today, you know you’re responsible for more than just accounting, audits, and compliance. You lead a make-or-break business intelligence unit and serve as a strategic partner in your company’s trajectory.

That’s why you need to know when to hold steady and when to pivot — and have the real-time forecasting tools to consistently and confidently make the right decision at the right time. Any barrier between smart decisions and the ability to consolidate and close quickly will have a huge impact on your success.

In recent blogs, we’ve provided guidance to CFOs on achieving greater forecast accuracy and adopting the right technology to make it sustainable. In this post, we’ll look at some of the greatest potential consequences of bad forecasting and discuss ways you can overcome those challenges.

Why is it important to act now?

Market uncertainty has forced many organizations to test their agility and efficiency by transitioning from monthly to weekly or even daily cash flow reporting and forecasting. Organizations with flexible processes and intuitive systems have adapted more comfortably to this new normal.

However, the ability to make fast, strategic decisions that align with business objectives isn’t a reality for many organizations yet. According to our recent survey, 93% of finance executives find themselves without access to real-time forecasting capabilities, leading to significant organizational and professional consequences.

Decisions are often based on unreliable data. This can be due to cultural, technical, and operational barriers that stand in the way of obtaining timely and accurate data to generate the insights necessary for effective forecasting and decision-making.

For those companies not yet forecasting accurately and in real time, what are the implications?

The organizational impact of inaccurate forecasting

When there are barriers between different functions, systems, data, and processes, the result is a lack of cohesive momentum toward organizational goals. Without accurate forecasting, achieving alignment on those goals is nearly impossible. A staggering 99% of executives have seen their businesses face negative consequences due to decisions based on inaccurate forecasts, leading to:

• Delayed deliverables (50%): Project timelines and deliverables are pushed back, disrupting operations and client satisfaction.
• Lost business opportunities (46%): Missed chances to capitalize on market trends or competitive advantages.
• Low productivity (45%): Resources are misallocated and efforts are duplicated, leading to inefficiencies.
• Workforce staffing issues (43%): Inability to accurately plan for staffing needs, resulting in either overstaffing or understaffing.

This crisis of confidence in financial forecasting is manifesting in real-world consequences for the entire organization, weighing on the long-term prospects for businesses.

The professional consequences for finance leaders

The pressure to rapidly produce financial reporting and forecasting often comes at the expense of quality and accuracy, contributing to a lack of confidence. An alarming 87% of finance executives acknowledge their forecasts are often out of date by the time they are presented to cross-functional stakeholders.

This undermines your ability to make informed decisions and can damage the credibility of your finance team. Every finance leader surveyed reported facing personal consequences due to forecast inaccuracies, including:

Increased workload (47%): Additional hours spent correcting and updating forecasts.

Criticism from stakeholders (41%): Loss of trust and support from key stakeholders.

Department hiring freezes (41%): Inability to justify the need for additional resources.

Delayed career advancement (40%): Stagnation in career growth due to perceived incompetence.

How do you overcome barriers with modern finance solutions?

Currently, many teams are held back by outdated IT infrastructure and lack of process automation. The average corporate finance team spends about 80% of their time manually gathering, verifying, and consolidating data. Despite these challenges, there is hope. Studies suggest that over 60% of finance activities can be fully or mostly automated with existing technology.

Implementing modern, cloud-based finance tools to automate your financial consolidation and close can significantly mitigate forecasting barriers experienced by your team. With an accurate and timely close process in place, finance is then able to produce accurate forecasts to support your strategic decisions. These solutions can be implemented in weeks, not months, easing fears of long implementations and resource drains.

Time to embrace agility and actionable insights

Modern finance software solutions allow finance teams to overcome the challenges of inaccurate and delayed forecasting, leading to better business outcomes and enhanced professional credibility.

By leveraging these technologies, finance teams can generate a faster return on investment for the business. With modern tools, you benefit from:

Automation: Data collection and adjustment are automated, allowing reporting frequency to scale up without superhuman staff effort or compromised accuracy.

Usability: Utilizing familiar tools like Excel as a front-end finance grid ensures staff can respond quickly to changing demands.

Flexibility: Finance users have control over processes and can make changes to workflows and templates without IT involvement.

Connectivity: Seamless integration of systems enables comprehensive reporting, analysis, and forecasting.

Your digital transformation journey is already underway. Now it’s time to embrace the financial automation tools that will allow you to focus on strategy, value creation, and leading your organization forward.