November 18th, 2020
Elements Affecting the Forecast Quality: Data
Forecasting is important to the business, but the forecast itself relies on high-quality data. When determining the data to use in the forecast, the following factors must be considered:
- Detail: How much detail are you putting in to your forecast? Keep in mind, more detail is not always better. If an item isn’t material to your business, you may be better off lumping it in with another cost or taking an average of previous year’s values.
- Drivers: Instead of forecasting revenue, for example, you may want to forecast the items that drive your revenue total, like number of units. This data point might be more useful as you plan production capacity, schedules, and more.
- External: Data you need to consider in the forecast is not only from within your business. What external factors impact your business? For example, a global pandemic may impact your sales!
- Timeliness: How timely is the data people are using for the reforecast? Are people budgeting using old information? When you upgrade to a sophisticated CPM solution like True Sky, you can integrate directly with data from almost any electronic source to give you real-time access.
The data you use to build your budget is important and should encompass both internal and external factors while being timely.
What data sources help build your budget?