This is a guest blog post from our partner Workday Adaptive Planning, explaining how dynamic forecasting can guide businesses through fluid markets and uncertain times.

The business landscape has never been so complex. Business leaders today must juggle and balance often conflicting priorities—be it top-line revenue growth, cost reduction, driving innovation, or investment in environmental, social, and governance programs. Balancing these priorities is a tall order, especially in light of ongoing shifts in market conditions.

Finance teams shoulder a huge responsibility in shaping the strategy for the business and mapping its future growth agenda through reliable, factual insights, gleaned through detailed analysis of a firm’s financial, people, and operational data that’s turned into action. To make sound decisions quickly, organizations must have ready access to data and be able to model multiple scenarios, allowing leaders to weigh the impact of possible investments and approaches. And because the world doesn’t stand still, it’s also critical to have the ability to recalibrate plans and forecasts frequently. 

A recent report published by Business Application Research Center (BARC), in collaboration with Workday, titled “Dynamic Forecasts: How to Steer in Volatile Markets,” says firms are responding to the urgency to be more agile and shifting their focus from traditional annual forecasts to rolling forecasts, an approach sometimes called dynamic forecasting.

Planning, Analytics, and Forecasting: Connecting the Dots

While many consider modernizing their planning solution a critical investment, few organizations have attained the required level of maturity to operate on a continuous cycle of planning, execution, and analysis.

Without closely coupling planning, execution and analysis, planning can be short sighted—and yet few solutions combine the three capabilities. According to our report, the top planning challenges are:

• Integration of planning and budgeting with analytics and business intelligence (45%).
• Gleaning valuable insights from plans and forecasts to inform decision-makers (40%).
• Enhancing integration of strategic with operational plans (38%).
• Faster forecasts and higher frequency (36%).

A planning strategy punctured with these shortcomings can lead to information gaps in decision making and corporate management.

The report suggests organizations must connect the dots between strategy and execution, planning and forecasting, operations and financial planning, and planning and analytics—the four facets of a pervasively integrated planning approach. So, what’s the glue that can hold it all together?

Dynamic Forecasting Holds the Key

The pandemic has accelerated the need for speed for businesses. Organizations today must act, react, and adapt faster to keep pace. Dynamic forecasting allows businesses to do just that. Dynamic forecasting is based on real-time data and updated on a rolling basis—typically quarterly or monthly. This is opposed to traditional annual budgeting and forecasts, or static planning, that is reliant on manual spreadsheets and have painfully long cycle times.

The benefits of adopting an integrated approach that combines dynamic forecasting and planning are manifold for businesses, resulting in not only enhanced speed and real-time insights but reduced manual labor and data errors.

A dynamic forecasting approach supports the deployment of technology such as intelligent automation to replace repetitive and transactional tasks, minimizing human intervention. Machine learning capability helps detect and predict patterns in processes and outcomes, making scenario planning more efficient. Augmented analytics, in turn, provides valuable insights into a company’s performance to feed back into the next planning and forecasting cycle.

Dynamic forecasting clearly has major advantages and the report indicates businesses are starting to pay attention. Our findings suggest 80% of firms view dynamic forecasts and projections as more valuable than traditional plans and budgets, and 75% consider predictive models as great sounding boards in volatile markets, especially for specialized functional areas.

Enhanced forecasting and simulations alone, however, are not enough if planning, analytics, and execution remain siloed. True value can be reaped when planning and forecasting are integrated with execution and analytics, along with automated processes, leveraging different data sources, workflows to control processes, and early warning mechanisms to indicate impending crises.

A North Star for Businesses

Dynamic forecasting holds the answer to solving many of the business challenges today. It can greatly strengthen enterprises against future exigencies, help them be better prepared for black swan events and global crises, and enable them to respond quicker and adapt faster to changes.

A dynamic, real-time forecasting mechanism, built on collaborative scenario planning, can greatly enhance an organization’s agility, equip them with flexible financial planning and decision-making support, and enable them to thrive in a changing world.

To learn more about dynamic forecasting, read the report.

This blog post was originally published on the Workday Adaptive Planning blog.

Read more FP&A Done Right blog posts:

FP&A Done Right: Top Priorities for Finance Leaders

FP&A Done Right: Can Updating your Office of Finance Software Mitigate “The Great Resignation?”

FP&A Done Right: xP&A Should Be in your Future