Financial planning and analysis professionals may be high-level executives, but they may still feel a bit like outsiders as they toil way, feeling unappreciated in the office dungeon. What you offer as analysts and financial planners is valuable and important to the company, but you should understand how to present your forecasts in more compelling, actionable, and game-changing ways for the company.
So how can the FP&A department make a difference? How can you better present your revenue forecasts to your CEO and executive team? Here, in part 2 of our series of articles about FP&A Forecasting Tips, we’ll look at how to present the revenue forecasting information you have gathered to help the executive suite.
1. Focus on ~10 KPIs
Companies may have hundreds of business drivers or KPIs (Key Performance Indicators). Each department tracks them and uses them to give them the insight they need to forecast and move forward. When presenting your financial forecasts to the executive suite, you must narrow those KPIs down to 10 or fewer.
The idea here is to focus on the Pareto principle drivers for your revenue forecasts. That way, you can focus on how that 20% will produce 80% of the value for your company. Of course, you won’t find all of those KPIs within the company.
You must also consider external drivers (macroeconomic data points) like interest rates, exchange rates, and other economic factors that must inform your revenue forecast as you move forward.
CEOs need you to interpret the numbers for them, but just throwing them on a page is uninspiring and unhelpful as you deliver your revenue forecasts. Instead, draw upon your data representations as well as words to deliver stories of what the data is really showing you.
Think about how you can turn those dry data points into an actionable path forward that will help your CEO and other execs understand exactly what you’ll need to do to succeed in the coming quarter.
You can show your CEO and other C-level execs the fork in the road. Then, let them choose which path makes the most sense for the company’s future. Your job, as a financial planning and analysis professional, is to outline the trigger points for the various scenarios.
When they have reviewed all the revenue forecasting details, your CEO and other execs will determine which direction they need to take to ensure the company survives and thrives in the current economic landscape.
The trigger points could be internal like sales metrics or external like market expansion and contraction. No matter what those triggers are, it’s your job to outline the implications for your CEO so they can decide.
If (metaphorically speaking) your company must go through a snowy mountain pass, snow chains are low cost and easy to get ahead of time but expensive and scarce once it snows. Of course, you can also amortize this minimal expense over future trips.
What that should hopefully show you is how important it is to take the faster route when others are afraid. A small hedge can have a huge ROI. But you have to be prepared and ready to decide (or offer up the data points that will give your CEO and executives the details they need to make the decision).
According to a survey of 635 FP&A directors, “61% of the time decision-makers selectively choose analytics that validates their gut instinct — what they would have done if no analysis had been performed.” FP&A professionals need to speak the truth when it comes to forecasting. When it’s bad news, you may feel nervous or even afraid to offer a full picture of what you’re seeing in the data.
Revenue forecasting can feel emotional, particularly in times of turmoil for your company. Regardless of what your fears may be, though, your CEO and other executives need to know the truth. Accurate data might paint a dire picture of the future.
Of course, it’s only by understanding where your company stands that you can start to really plan and then move in the direction that will hopefully help your company survive and thrive, even through the tough choices, with internal and external upheavals. Consider how data can help win the day, showing you the opportunities for improvement and growth.
That’s why we built the best revenue forecasting solutions under the hood of our products. At Next Quarter, we make our solutions easy to access and use so FP&As can make a coherent and actionable plan for the executive suite.
Contact us if your company needs help to turn all that data into actionable revenue forecasting insights. We can help.