5 Tips for Turning Uncertainty Into a Competitive Advantage
Join us in a city near you at Entrepreneur’s Accelerate Your Business event series kicking off Feb 23. View cities and dates »
Leaders of the most successful, efficient businesses are masters of preparation. They’re continuously planning for a variety of future scenarios, engaging the entire organization in the process, and utilizing both financial and operational data in their forecasting and analyses.
These leaders are realists. They understand that many of today’s uncontrollable external uncertainties can impact their business. An April 2014 survey of 325 U.S. financial professionals found that spikes in gas prices, the Affordable Care Act (Obamacare), and the impending 2014 U.S. midterm elections are all top concerns that are likely to impact financial forecasting and planning for many businesses.
There are also internal factors to consider; things like product development, executive changes, and global expansion. These factors can also impact business performance and are often more controllable than any external business factors.
These factors can lead to a wide range of business outcomes, which is why it’s so critical for business leaders to plan for all possible outcomes. Knowing that external factors are beyond their control, the most strategic leaders turn internal factors like knobs or dials to learn how different outcomes will affect overall business performance. When one of the planned scenarios becomes reality, the business is in prime position to either minimize negative impacts or efficiently capitalize on opportunities.
There is no doubt that some or all of these internal and external factors will have an impact on your overall business performance. So ask yourself: If something within my business landscape drastically changes tomorrow, how quickly could I re-plan and re-forecast based on new realities?
If your answer is “not quickly enough,” here are five ways to better prepare your business to handle any external and internal uncertainties you may face:
1. Forecast frequently. Annual budgets no longer suffice. In order to achieve long-term success, business leaders must frequently re-assess external and internal factors that impact the business, and then re-forecast according to the new realities. More than 60 percent of businesses today are creating yearly budgets that become obsolete within 4-6 months, according to a 2013 survey of more than 300 finance professionals in North America. That means these businesses are often driving toward goals that are based on a previous reality. Don’t fall victim to this budgeting trap.
Today’s highest-performing businesses have a rolling forecast so that plans are never out of date. They have a repeatable practice during which department leaders can import actuals into the overall business plan, creating a single, constantly updated version of the truth across the organization.
2. Automate. Industry leaders spend less time collecting data and more time analyzing and understanding what that data is telling them. Cut down the time it takes to develop and re-develop reports, budgets, and forecasts by automating data collection as much as possible. KPIs, dashboards and scorecards can, and should, be automated so you can update plans while the information still accurately reflects your business and industry landscape. Drill down and focus on transactions and metrics that drive the business forward. Don’t waste time simply managing the data.
3. Build communication and accountability. Cross-departmental participation is essential to creating dependable plans and forecasts. Updated metrics that combine data from every department allow you to hold people more accountable to those metrics.
Make the process intuitive to build a collaborative environment. Instead of having isolated departmental plans and forecasts, create a central, constantly current hub of information through which people can easily share and collaborate. That way, you’re more likely to get the input you’re looking for.
4. Efficiently create financial reports. Speed, accuracy and workflow are the three secrets of business leaders who have created a repeatable planning, reporting and re-forecasting process. Automating data integration and financial consolidation will cut by days or weeks the time it takes to create financial reports, providing management with accurate and timely information on which to base decisions and create updated forecasts. Drag-and-drop, intuitive reporting and dashboard creation tools empower managers and free finance from tedious, low-value report creation tasks.
5. Achieve self-service. If you want business users to participate in planning and forecasting, give them intuitive tools to do so. Invest in applications that allow users to access, update and analyze their data with minimal training. Doing so will take the strain off of your Finance and IT teams, while achieving the level of fast-paced planning, reporting and re-forecasting required in today’s business environment.
Regardless of what’s thrown your way – a nail biting mid-term election season that rattles your customers or an unexpected management change that shakes morale – the appropriate tools and strategic, forward thinking will keep you ahead of the pack and ready to turn on a dime.
Related: How to Forecast Revenue and Growth