Predicting future revenue is always difficult, but with markets and supply chains fluctuating so quickly, it is nearly impossible.
Still, Financial Planning & Analysis (FP&A) professionals do what they always do: They come to the rescue.
A CFO isn’t asking for perfect revenue predictions, just general directions that help them navigate the future business landscape. FP&A should give the CFO a road map with journey options, conditions, road blocks, and the dangers associated with alternate routes. All of these factors make revenue forecasting easier. In this blog post, learn more about how FP&A teams can help CFOs and executive teams predict future revenue outcomes and arrive at the correct destination. Then discover Next Quarter’s solution for better forecast accuracy.
The Road to Revenue Intelligence
To extend the above metaphor:
OPTION MENU: There are three routes to a destination: North, Interstate, and South.
CHOICE: The North route through the mountains is the most direct way to that destination.
CONDITIONAL TRIGGER AND COUNTERMEASURES: If it is snowing, you might need to put on chains to get through the pass. (Buy chains now, just in case.) If there is a lot of snow, the pass will be blocked. Then you should take the South route instead. You don’t have to make an irreversible decision until you reach this point on the map.
RISKS: If it is snowing in the North and raining in the South, the South route floods 60 percent of the time.
COSTS: Bad weather delays for the North and South routes will add 10 percent to costs. However, the Interstate, which is a toll road, will add 15 percent but guarantee an on-time arrival.
Once the executive team plots a course, then the FP&A team can offer turn-by-turn directions.
If the organization uses a revenue intelligence solution like Next Quarter’s Financial Clarity, then the FP&A team can alert the team to potential problems. If there is an accident ahead, CFOs can turn off at the next exit to save time.
Financial Clarity powers your organization with ongoing revenue intelligence, helping you make smarter decisions about the future. You can forecast growth based on data and improve profitability. Available as a feature bundle in the Next Quarter platform, the Financial Clarity solution solves many of the problems organizations face when predicting revenue outcomes and generates forecast accuracy of over 95 percent. You can say goodbye to Microsoft Excel and get a real-time picture of revenue whenever you like.
The type of person that becomes an FP&A professional is, by definition, precise. They often feel incapable of creating any kind of map when all they can see are a few peaks in a fog-covered landscape. Winging it is outside their comfort zone. But it is exactly what the executive team needs.
So how is an FP&A supposed to conjure such miraculous clarity where there is none?
FP&A professionals possess advanced accounting and finance skills but they are not always problem-focused. Numbers-focused generally looks back, while problem-focused is about tackling future challenges.
To succeed with the problem-based approach, finance professionals need to be able to tell the executive suite a good story. The structure of good financial storytelling is as old as Aristotle: Problem, Conflict, Resolution.
In act one, FP&A presents the problem. Sometimes each division sees the problem differently. FP&A should try to present the whole picture or at least look at it through a new lens.
The second act of this story is the road of trials. All the conflicting choices, costs, and other variables. Frequently the CFO will ask numbers-based questions. FP&A needs to answer financial questions in the larger context of the organization as a whole. A good FP&A doesn’t necessarily need to advocate for one path; there may be several viable paths. The FP&A must fairly outline the costs and variables each path brings.
In the final act, the resolution is how to execute the chosen path best. The FP&A also needs to outline how to respond if/when things go wrong at different junctures.
If FP&A follows this structure, they will be very successful in becoming true business partners.
For FP&A professionals to become more problem-focused, they require the right data. Good data can improve accuracy and make it easier for these professionals to support the executive team.
Next Quarter’s solutions support FP&A teams by enabling actionable real-time insights based on accurate data. Fortune 500 companies use this AI-powered Salesforce-native platform to streamline workflows and predict future revenue outcomes.
Financial Clarity, available as a feature bundle in the Next Quarter platform, provides next-level forecasting for FP&A teams and CFOs, allowing users to access a real-time picture of revenue in one place. You can toggle the Financial Clarity solution on and off, depending on the needs of your organization.
Now FP&A professionals can help CFOs arrive at the right destination with Next Quarter’s Financial Clarity solution. Schedule a free demo now!