20th Mar 2019
The forecasting market hasn’t had the smoothest growth, as it has struggled to dislodge Excel in the hearts and minds of finance teams. But there are stirrings of life and MHR Analytics’ Nick Felton has a theory about why.
“It’s uncertainty,” said Felton. “The adoption of forecasting is driven by the economy. After the financial crash of ‘08, we saw an uptick. Forward to now, we’re in a similar period of economic uncertainty.
“We have a potential number of scenarios that no one can tell us which way it will go. That's driving back into the businesses picking up on forecasting again. They need to model different outcomes in the future.”
According to Felton, MHR Analytics has seen its clientele increase at a steady clip as finance teams seek to tame uncertainty. One new client is Rachel Eade, the finance and operations director of St Pierre (formerly Carrs Foods), a Manchester-based international bakery business.
“We’ve had a lot of growth,” said Eade. “Our turnover has gone from a steady £21-22m a year (2014 to 2016), and it has eked up in increments. From £22m to £28m (2015), to £38m (2016), to £49m (2017). For 2018 we're going to report £69m.”
With this growth, said Eade, comes a risk of growing so quickly that your service to your customers deteriorates. This is primarily why St Pierre has chosen to invest in forecasting software now.
“We need to forecast demand in order to provide meaningful forecasts to our suppliers across Europe. We source from 20-odd bakeries across Europe. We want to provide them with good forecasts so they can get their supply chains in gear to get those products to us.”
Add international suppliers into the mix, and this high growth environment defies the limits of a spreadsheet. “The sheer number of customers means it's difficult to handle that in Excel. Forecasting software makes it easier for you.
“It provides functionality that makes it easy to track your forecasting against actuals and it allows you to automatically drag forecasts and tweak them up and down without having to go into every cell.”
Forecasting beyond the finance team
Both Eade and Felton talk about how forecasting is an organisational, rather than a solely finance based pursuit.
“We have a number of forecasting sources in the business. In the UK, we have a number of account managers who'll look after different customer sectors. When you're looking at the multiples, if you've got a few large customers that's not too bad -- but we've grown a lot in the convenience sector. We've got a lot of small customers as well. And then we also get inputs from account managers in the US.”
When MHR implements forecasting software at a business, a large portion of the time is spent on enabling the entire business to partake. “Salespeople, production planners, HR people -- the lot,” said Felton. “If you've got a successful planning operation across the organisation, that's where you get value.”
Eade’s role, as FD, becomes more strategic and less administrative once the MHR implementation culminates in a month’s time. “I'll have a lot more visibility of our forecasts. We do forecast but the information is hidden away in all these spreadsheets.
“Right now, if I go to our finance team and ask 'I want to know what our sales to America will be?' they'll have to go away and look. Now the information will be live at my fingertips and it'll be simpler to track our performance against our forecasts.
“At the moment, your actuals are in your accounting system and the forecasts are in Excel. This brings everything together because the software has feeds from our accounting system.
“The software allows us to drill down and view things at different levels. We can look at the business as a whole or we can just look at the UK, or we can look at a brand or a sector. You can slice or dice the data to focus on specific areas of the business.”
Ultimately, said MHR’s Felton, there’s no end game to planning and forecasting. “It’s evolution, not revolution,” he said. “You should continue refining it and getting better at it. You should be learning and you should be getting more insight and trying more things.”
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.