Using History to Determine Accuracy and Trend Analysis
History is a powerful tool. The past is what shapes everything up to the present and the actions taken in the past go somewhat in governing what happens in the future. It is therefore a surprise that history, not only in business but in general, isn’t consulted more than it is today.
This is no less true in the business world. The power of learning from the past is the driving force in developing the SymVolli business system, but for the Finance Director the all important question when sitting down to calculate the revenue forecast and allocating resources for the coming months is “Is what I am looking at accurate?”. The secondary question that follows from this is, "If these numbers are correct, how realistic is the forecasted totals in relation to what will actually be achieved".
The Finance Director’s job usually is to be as conservative as possible in allocating resources because there will be an inevitable discrepancy between the forecast and the actual numbers achieved. The more conservative a Finance Director is, the less he can trust in the forecast which also means that fewer resources can be allocated and the business has less chance of growing. The answer is learning from the past to accurately predict the financial future.
In simplistic terms, if salesman a. brought in £100,000 in the last quarter from an initial pipeline of £500,000 and that midway through this quarter he forecasts the same but only has a pipeline of £250,000 then a historical analysis of his performance would suggest he only converts 20% of his pipeline and that this quarter so far will only yield £50,000. Over a greater time the historical trends show greater accuracy and highlight accuracy percentage more effectively.
Simple tasks like forecast/actual comparison are only the beginning. Forecasting accuracy in SymVolli can be set up to analyse individual elements of forecasts right down to territory, individual, products etc. so that the Finance Director can have a greater acceptance of sales forecasts.