As you think about your company’s ability to forecast future sales and profit, what are two or three of the most significant variables that are difficult to predict?
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HI Veronica
You noted customer orders as a key driver towards supporting financial forecasts. This is a great driver. I would also see an input to this being average customer order size and whether the order is recurring or not. How do you determine or guesstimate how many customer orders you will have in a year? What goes into determining that forecast to ensure it is “credible” to your point.
Do you rely on estimates based on GDP? Do you rely on salespersons estimates? Do you rely on contractual order history,etc. . . ?
Lastly, I enjoyed your idea about visualizations to express progress towards forecasts. Forecasting is about the power of habit and keeping the team focused on a goal that the organization is marching towards.
I look forward to your followup thoughts.
Lou
Subject: Masters Management
Hello! This was my answer to the question – see attached image
This is the original discussion question:
Week 5 Discussion
Forecasting
This week, we learned about the importance of forecasting future sales and profit for companies. Of course, there are many factors which can affect the reliability of these forecasts, such as interest rate fluctuations, competitive innovations, new customers, etc. But still, finance leaders must make every attempt to build their business strategy on forecasts that are as accurate as possible.
- As you think about your company’s ability to forecast future sales and profit, what are two or three of the most significant variables that are difficult to predict?
- What information and data would you use to improve the forecast accuracy?
- How can you go about collecting and leveraging this data?
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