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Software for Forecasting – 3 Common Forecasting Mistakes to Avoid

Roger Knocker • November 27, 2023

Software for Forecasting – 3 Common Forecasting Mistakes to Avoid


If business forecasting seems like an attempt to accurately forecast the weather, it is, because:


  • The wrong tools are used – spreadsheets were never meant to be complex and sophisticated forecasting tools, and yet businesses often rely on these outdated methods to forecast.
  • Forecasts are made regarding behaviour that can change, and can thus not be predicted with 100% accuracy
  • Personal agendas drive the forecasting process – managers compete for funds, and thus make forecasts to support their ideas..



Companies often spend thousands on the forecasting problem in the hopes that it will magically be solved. But, with lousy forecasting results year after year, it is time to look at a new solution. We offer sophisticated, but easy-to-use software for forecasting that reduces the time it takes to forecast, reduces errors in forecasting and improves decision-making power.


Instead of managers with subjective agendas controlling the figures to suit their goals, objective analysis can be done. Rather than having weeks pass before the forecasting is completed and already outdated, regular forecasts can be made. The software for forecasting, that is available from us, is scalable, capable of complex calculations, allows for the use of data from various sources, and helps to save time. That being said, regardless of how powerful the software is, if not used correctly and if incorrect forecasting practices are followed, the business still ends up with lousy forecast results.


Let’s take a look at three common forecasting mistakes to avoid and how to make best use of software to avoid such.


1. Over complicating the function 


The more complex the forecasting process and the more people involved, the better the chances for political agendas and inaccuracies to influence the forecasting process. It must be a scientific process, rather than a subjective exercise. Also consider how having many people in authority work on the forecasting actually costs the company money. Every person involved is paid, and they’re spending their time on a task that can be completed quicker, objectively and accurately using appropriate software for forecasting, which streamlines the process and thus saves the company money.


2. Choosing a forecasting model just based on history 


Every scenario must be compared to history, and the one that fits the recent history is then selected for future forecasts. What is the wrong with this picture? It is great if it fits recent history, but the objective is to find one that not only fits closely, but perfectly. Yet, this is still no guarantee for an absolute perfect model for future forecasts. Instead, the model should be fitted to a systematic structure, to ensure a more accurate forecasting model. Don’t over-fit!


It is especially dangerous if the forecaster is not really experienced, as for him/her the model may seem perfect. But consider this – if the model chosen is not correct, even if it fits to history, and it doesn’t make provision for factors which affect behaviour, then it will mean that future forecasts will be even worse. The focus should not only be on history, but also the accuracy of future forecasts. Our software for forecasting enables such, and thus helps to avoid another common forecasting mistake.


3. Expecting superb accuracy when dealing with erratic behaviour 


If the patterns are smooth and predictable, then the forecast can reflect such. However, expecting 100% accuracy when working with ever-changing and erratic behaviour is dangerous. It is thus essential to consider the behaviour that needs to be forecasted when setting accuracy expectations, in order to avoid wasting valuable resources in an attempt to get unrealistic accuracy levels.


A more appropriate approach would be to make use of a naive forecast model, which can use the last known value of the erratic behaviour as a basis for the future forecast. You can also use a known value from twelve months ago to make a forecast for the same period in the current twelve months. A third option is to get an average for the last three periods, whether months or years. Keep in mind that with erratic behaviour, it is not possible to get close to 100% accuracy, but you can use the percentage accuracy as the baseline for the evaluation of future forecasts.


Avoid the above mistakes by following the tips provided and making use of appropriate software for forecasting, as available from us, for a higher level of accuracy.

By Clerissa Holm March 18, 2025
In the world of finance, numbers tell a story. However, that story is often buried beneath layers of spreadsheets and complex datasets. For financial professionals, the challenge is not just about understanding these numbers but also presenting them in a way that drives decision-making and inspires action. Enter data visualisation – the art of transforming data into clear, compelling visuals. Among the tools that have proven especially powerful are the line graph and the waterfall chart. These visuals help finance teams translate dry statistics into impactful narratives. In this article, we explore how these graphs can transform financial storytelling. The Importance of Data Visualisation in Finance Finance professionals are accustomed to handling vast amounts of data, from profit margins and revenue growth to expense tracking and risk assessments. Yet, presenting these figures effectively to stakeholders is a different ballgame. Visualisation simplifies this process, turning complex data sets into accessible insights. When done correctly, data visualisation: Enhances comprehension: Humans process visuals 60,000 times faster than text, making it easier for stakeholders to grasp key information quickly. Drives decision-making: Clear and compelling visuals help executives make informed decisions without wading through dense reports. Highlights trends and outliers: Visual tools can bring hidden trends and anomalies to light, prompting timely actions. Improves understanding and communication with business - Business doesn't always get what Finance is trying to communicate and good visualisations go a long way to bridging the gap. Better communication improves alignment to strategic financial goals. The line Graph: Unravelling Trends Over Time The line graph, also known as a stream graph or a stacked area graph, is a powerful tool for visualising changes in data over time. It is especially effective in showing how multiple categories contribute to an overall trend. In finance, line graphs can illustrate revenue streams, expense categories, or investment performance in a visually engaging manner. Use Case: Revenue Streams Analysis Imagine a financial report for a company with diverse revenue streams, such as product sales, services, and subscriptions. A line graph can display how each stream has evolved, highlighting peaks and troughs. The thickness of each ‘line’ represents the contribution of that revenue stream to the total, making it easy to spot which areas drive growth. Benefits of line Graphs: Trends Made Simple: Displays how multiple components evolve over time. Visual Impact: The fluid, organic design makes it easier to follow changes. Comparative Insight: Helps compare different categories intuitively. The Waterfall Chart: Bridging the Gap Between Figures Waterfall charts excel at breaking down the cumulative effect of sequential data points, making them ideal for financial analysis. They help bridge the gap between figures by showing how individual elements contribute to a total. Commonly used in profit and loss statements, budget analysis, and variance reports, these charts provide clarity in understanding how specific actions impact the bottom line. Use Case: Profit and Loss Analysis A financial analyst preparing a quarterly report might use a waterfall chart to demonstrate how various factors—like increased sales, higher marketing spend, and cost savings—impacted net profit. The chart’s structure, with its clear progression from starting figures to the final result, makes it easy for stakeholders to follow the financial narrative. Benefits of Waterfall Charts: Clarity: Simplifies complex financial data by showing individual contributions to total figures. Transparency: Clearly distinguishes between positive and negative impacts. Decision Support: Helps executives understand the key drivers of financial performance. Choosing the Right Visual for the Right Data Selecting the appropriate visual tool depends on the story you want to tell: Use line graphs for illustrating trends across multiple categories over time. Opt for waterfall charts when you need to detail the step-by-step impact of specific factors on an overall financial figure. By mastering these tools, finance professionals can enhance their storytelling, transforming raw data into insights that drive strategic decisions. Conclusion: From Data to Decisions The ability to visualise data effectively is a powerful advantage. The line graph and waterfall chart are more than just visual aids—they are essential tools for financial professionals looking to make data-driven decisions that resonate with stakeholders. By adopting these techniques, finance teams can turn numbers into narratives that not only inform but also inspire action. In the end, the power of finance lies not just in analysing data but in presenting it with impact.
Financial KPIs Every CFO Should Track in 2025
By Clerissa Holm February 17, 2025
In the ever-evolving financial landscape of 2025, CFOs are tasked with navigating complexities ranging from global economic shifts to technological advancements. The ability to track and analyse the right financial Key Performance Indicators (KPIs) is no longer a luxury but a necessity. These metrics not only provide insight into an organisation’s financial health but also support strategic decision-making. Here are the top financial KPIs every CFO should prioritise in 2025: 1. Revenue Growth Rate Revenue growth is a clear indicator of a company’s ability to generate sales over time. This KPI allows CFOs to evaluate the success of business strategies and identify trends in market demand. Formula: Revenue Growth Rate = [(Current Period Revenue - Previous Period Revenue) / Previous Period Revenue] x 100 Why It Matters: Monitoring revenue growth helps CFOs assess performance against strategic goals and anticipate future cash flow needs. 2. Gross Profit Margin Gross profit margin measures the profitability of core business operations, excluding indirect costs like administrative expenses. Formula: Gross Profit Margin = [(Revenue - Cost of Goods Sold) / Revenue] x 100 Why It Matters: It reveals the efficiency of production processes and pricing strategies, enabling CFOs to identify areas for improvement. 3. Net Profit Margin While gross profit focuses on operational profitability, net profit margin considers all expenses, including taxes and interest. Formula: Net Profit Margin = (Net Income / Revenue) x 100 Why It Matters: A high net profit margin indicates strong financial health and the ability to manage expenses effectively. 4. Cash Conversion Cycle (CCC) The CCC measures how quickly a company can convert its investments in inventory and receivables into cash flow. Formula: CCC = Days Inventory Outstanding + Days Sales Outstanding - Days Payables Outstanding Why It Matters: In 2025, with supply chain disruptions and rising interest rates, efficient cash flow management is critical. The CCC helps CFOs identify bottlenecks and optimise working capital. 5. Operating Expense Ratio (OER) This KPI compares operating expenses to revenue, offering insights into cost management. Formula: OER = (Operating Expenses / Revenue) x 100 Why It Matters: Keeping operating expenses in check is vital for maintaining profitability, especially in uncertain economic climates. 6. Debt-to-Equity Ratio This KPI highlights the financial leverage of the company by comparing total liabilities to shareholder equity. Formula: Debt-to-Equity Ratio = Total Liabilities / Shareholder Equity Why It Matters: With interest rates fluctuating in 2025, maintaining a healthy balance between debt and equity is crucial to avoid over-leveraging. 7. Return on Equity (ROE) ROE measures the efficiency of a company in generating profits from shareholders' investments. Formula: ROE = (Net Income / Shareholder Equity) x 100 Why It Matters: A strong ROE signals to investors that the company is effectively using their capital, which is vital for securing future funding. 8. Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) EBITDA provides a clear picture of operational profitability without the influence of financing and accounting decisions. F ormula: EBITDA = Net Income + Interest + Taxes + Depreciation + Amortisation Why It Matters: CFOs use EBITDA to benchmark performance against competitors and industry standards, making it a key metric for strategic planning. 9. Customer Acquisition Cost (CAC) As businesses invest in growth strategies, understanding the cost of acquiring new customers becomes crucial. Formula: CAC = Total Sales and Marketing Expenses / Number of New Customers Acquired Why It Matters: Tracking CAC helps CFOs ensure marketing spend aligns with long-term profitability goals. 10. Economic Value Added (EVA) EVA measures the value a company generates beyond the required return of its shareholders. Formula: EVA = Net Operating Profit After Taxes (NOPAT) - (Capital Employed x Cost of Capital) Why It Matters: EVA provides a holistic view of financial performance, emphasising value creation over short-term profits. Final Thoughts In 2025, CFOs must adopt a forward-thinking approach, leveraging advanced analytics and real-time reporting tools to stay ahead. By focusing on these essential financial KPIs, CFOs can drive strategic growth, ensure resilience, and foster long-term success in an increasingly competitive landscape. Tracking these metrics isn’t just about numbers; it’s about enabling informed decisions that align with the company’s vision and goals.
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