Strategies for presenting spend forecasts in a clear and understandable format
Presenting spend forecasts in a clear and understandable format is essential to financial success. It enables decision-makers to analyze the financial landscape, assess risks, and optimize allocations for maximum returns. According to the HubSpot business forecasting guide, there are four major forecasting models:
- Length of the sales cycle - This model relies on the sales cycle length to determine the core expenditure points.
- Time series forecasting - This model relies solely on historical data on company expenditures to determine future expenses' value.
- Demand forecasting - This model relies on the internal and external factors that affect demand for a particular product/service.
- Regression testing - Similar to the Time Series model, regression testing relies on historical data. Still, unlike it, regression analysis relies on a set of statistically-significant variables that affect company spending in general rather than historical data on the overall company spending only.
Independent of the model you choose for your business, this will help you simplify forecasting processes to present data in a manner that is accurate yet easy to read — looking for a more detailed guide on picking the suitable business forecasting model for your business? This piece by Harvard Business Review will save you trouble.
As a financial professional with a lot of experience and "professional baggage," you need to communicate the data from the forecasting tools in a way that's easy to comprehend for a non-finance stakeholder. Make sure to translate information into digestible chunks to ensure the key messages are conveyed succinctly and accurately.
That's where a spend management solution with integrated charts or graphs comes in handy. They will provide an at-a-glance overview of spending until the present day, inform the development of future strategies, and help the key stakeholders understand the data better. This data could be beneficial for interpreting historical data and presenting the spending summary to upper management.
Implementing proper spending forecast measures will help you present your forecasts succinctly while ensuring accuracy — increasing the likelihood that stakeholders will have confidence in them.
The role of spend forecasts in building trust and credibility with core stakeholders
According to The Economist report, 88% of C-level executives say executing strategically-planned initiatives is "essential" or "very important" for their organizations' future. Therefore, building trust and credibility with stakeholders using spend forecasts is essential to any successful spend management plan. And it would be best if you went into your forecast presentation with the following:
- Understanding the material you will present thoroughly and being able to answer the questions will show your stakeholders that you know what you're talking about.
- A clear explanation of the assumptions behind the forecast will guide the decision-making process among top-level executives, empowering them to support you in making data-driven decisions related to the company's budgets.
- Planning the presentation materials and providing relevant figures that are easy to comprehend will add clarity to any decision you propose. It will also help both parties feel more comfortable with their decisions.
Now that we established that most C-level executives understand the importance of forecasting and their connection to the central business goals let's discuss what you could do "if things go South."
Best practices for spotting forecast deviations and how to address them
There's no need to panic when changes or deviations from the original forecast occur. Instead, you should focus on pinpointing the main factors that made forecasting inaccurate. This can be done following a simple 3-step forecast change communication framework:
- Review the details of the new forecast and note all the factors that brought major differences compared to the original one.
- Provide context to each one of the issues, and identify all the items that deviated substantially. Help stakeholders understand why certain changes occurred and keep everyone up-to-date on future forecasting plans.
- Devise a set of suggestions for avoiding this discrepancy in future forecasting plans.
It will also be beneficial to point out any risks/uncertainties that may arise during the forecasted period as soon as you spot them - this would help you predict any possible deviations from the plan and address them on time.
A 3-step process for addressing stakeholders' forecasting questions and concerns
Proactively addressing questions or concerns from stakeholders about spending forecasts is essential in establishing trust. You should always strive to provide accurate, timely, and data-driven responses to stakeholders' questions.
Here's how you can mediate/address any feedback or concerns they might have using a simple three-step process:
- Encourage stakeholders to submit feedback on the initial budget forecasts and share any concerns they might have directly with you.
- Analyse the submitted feedback and assess whether their concerns can lead to any possible deviations from the plan in the future. Proactively analyze spending trends and consistently monitor spending activity to determine potential deviations.
- Empower stakeholders with a simplified analysis of spending performance and keep them informed throughout the investigation process - spend forecasting can be an effective tool for making strategic financial decisions and guiding your entire team.
Pro Tip: A spend management solution like Payhawk can automate the entire process of business spend reporting.
Using these three steps iteratively will help you establish a more robust level of trust with the core stakeholders and reduce the chances of miscommunication if some metrics change over time.
How often should I communicate spend forecast data to my stakeholders?
Regular communication helps align strategies, goals, and objectives within an organization to increase efficiency, financial success, and trust among frequent participants. Establishing the frequency of communication between stakeholders and the organization can help you ensure you address stakeholder concerns effectively.
As a rule of thumb, you should:
- Have a recurring time slot reserved for budget forecast reporting and updates.
- Communicate any new critical issues as they arise ASAP.
- Avoid communicating the forecast data more often than necessary (unless it's an urgent update/deviation from the plan)
Ultimately, the frequency of the budget forecasting meetings will depend on the stakeholders' level of engagement, the urgency of the deviation presented, and the flexibility of the budget planning within the company.
Some rapidly-growing businesses with tight budgets may need weekly meetings, while established companies with budgets set for months may do better with a monthly update.
Best ways of communication for spend forecast meetings
Technology has made communication more accessible by taking advantage of instant messaging and emails. But despite all these advancements, in-person budget forecasting presentations are the superior way of communication. Meeting with someone in person allows us to read between the lines and truly understand what someone is saying. Alternatively, if your company cannot arrange for everyone to be in the same office simultaneously, video conferencing calls shall also do fine.
Meeting face-to-face allows people to ask questions and clarify misunderstandings to develop the most accurate solutions. Additionally, conversational interaction will enable people to build a rapport and promotes trust between those involved. This improves collaboration which is vital when working together to reach a common goal.
Presenting forecasting data to the key stakeholders - expert tips for your presentation
Ultimately, how well you present this data will decide its impactful message's success rate. Therefore, your presentation needs to be on point. Here are a few techniques/tips you can use to get started with your winning 'pitch deck':
- Tone: You need to maintain credibility, authoritatively present accurate and evaluative facts, and communicate the core points to everyone visually in a way that's easy to comprehend. Be transparent, honest, and brief in your explanation.
- Detailed precision: Only present the data essential for spurring meaningful understanding around the forecast shown. Present the figures to help shareholders understand why you made a particular budgeting decision.
- Avoid filler data and metrics: You will have to go through hundreds of datasets and metrics to make informed budgeting decisions, but your stakeholders don't have to - avoid putting irrelevant or intermittent data/figures to keep your audience engaged.
- Visual aids: Accompanying high-quality presentations, graphs, and charts can help make complex information easier to comprehend and help you deliver the main points effectively.
Simplify forecast reporting with a leading business spend management solution
Addressing questions or concerns from stakeholders about spending forecasts can be difficult, but it does not have to be. The easiest way to improve your forecast reporting process is using a spend management solution like Payhawk.
Payhawk visually overviews all the company expenses, allowing you to track expenses across multiple entities, and it comes loaded with several visual reports. If you are looking for a comprehensive solution to simplify your company's forecasting - you can say goodbye to time-consuming expense management and hello to effortless forecasting with Payhawk. Sounds enticing? Book a demo today.