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Solver Global

How to Forecast Your Company Budget During Unexpected Events


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If your company is suddenly impacted by something like the COVID-19, a product launch delay or an unexpected acquisition, your company budget may no longer be useful.

 

Replace the Budget with a Forecast

Sometimes unexpected events happen, and it is clear that the business’ actual performance is moving so far above or below the annual budget that it no longer provides value in the following ways: 

 

  • A cost control tool
  • A target for employee compensation plans
  • A detailed financial break-down of corporate strategic goals
  • A financial plan for various corporate initiatives

 

The signs that your budget is becoming obsolete due to unexpected events are:

 

  • Management comments why a revenue or expense budget variance is occurring
  • Complaints from sales teams that their targets are too high due to XYZ event
  • Lack of budget ownership from department heads

 

Some organizations have a predefined monthly, quarterly or semi-annual forecasting process, and when the unexpected happens, they simply take this into account next time they reforecast. These companies often have budgeting and forecasting software such as Solver, Adaptive Insight or Planful to speed up and automate the time and effort it takes to create budgets and forecasts.

 

Reforecast the Budget

Whether your forecasting requirements are simple enough to be handled in Excel or your organization is using a modern budgeting tool, there are ways to avoid the slow bottom-up data entry process. The issue with the latter is that the new forecast may already be old by the time you are done. In these cases, the unexpected event that led to the reforecast could have changed again, leading you to start all over.

 

An  automated reforecasting model can create an entire forecast in minutes or hours versus days or weeks with manual methods.  An automated model also enables you to create multiple scenarios. For instance, armed with a “Best Case”, “Worst Case” or “Likely” forecast scenarios, you can be prepared for unexpected events without rushing to reforecast.

 

If you want to learn more about reforecasting your company budget, read more here.

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