When people think of the word forecast, the first thing that comes to mind is usually the weather. But in business, forecasts are produced for many reasons: product demand, sales, revenue, hiring needs and much more. A forecast is really a prediction about what will happen at some future date. If you look up forecast and predict in the dictionary, you’ll find that the two words mean essentially the same thing.
The ability to accurately predict what is likely to happen at a point in the future, and build plans and strategies based on that knowledge, is essential to an organization’s success. But what happens when a forecast is inaccurate? What is the impact on a business, its customers or its partners? For businesses, the ability to catch even a tiny glimpse of what the future may hold can lead to happy customers, improved efficiency and productivity, and highly successful business decisions. As a result, predictive analytics is changing the game for finance organizations.
On-the-go business professionals need accurate forecasting in today’s hypercompetitive business environment. Ongoing reforecasting helps managers to boost predictive accuracy that can answer these critical questions: What did we expect? How are we doing against our plan? And, even more important, how should we adapt our plans going forward?
For example, if revenue forecasts are below targets, a bank or financial services company may need to recalibrate products or services to attract new customers or keep current customers from leaving. With a model-based approach to forecasting, marketing can perform what-if analyses to test new product or service initiatives that examine impact by customer and customer segment. In turn, bank sales team members can evaluate these scenarios to adjust their sales strategy, such as maximizing time spent with the most profitable customers.
Updates to plans feed directly to the finance team. That team then turns the marketing and sales projections into net revenue projections—all in a matter of hours or days rather than in weeks or months, when remedial action may be too late.