How to avoid 5 typical forecast mistakes

Not all forecasts are the same – and of course, company-specific circumstances and challenges must always be taken into account. However, it can be observed that the forecast in reality is often far away from common best practice recommendations. Based on our experience from various consulting projects, we can identify 5 typical mistakes that many companies make with regard to the forecast. If these mistakes are avoided, it is possible to significantly increase the quality and speed of the forecast.

Best practice: 8 success factors that take your forecast to a new level

Mistake #1: Classification of forecast vs. planning

With reference to the deviations coming from the actual, the forecast often serves as an argument or proof that the planning is unrealistic and cannot be achieved. In the worst case, the forecast even becomes the new plan, so that the original goals are no longer pursued.

Mistake #2: Forecast content and level of detail

In many cases, the level of the forecast corresponds to the level of the planning. This means that cost elements and cost centers are planned at the same level of detail. This results in unnecessarily long and cumbersome processes as well as growing resentment among stakeholders.

Mistake #3: Forecast creation

The creation of the forecast is bottom-up. Actual and planned values are essentially mixed manually. This requires the involvement of a large number of controllers – with a correspondingly high use of resources.

Mistake #4: Technology/architecture

The technological approach to forecast creation is often not in line with current standards. The technologies used are outdated and the systems are not integrated or harmonized. Only internal, structured data is used.

Mistake #5: Result review

In case of a not optimally chosen forecast approach or a fundamentally wrong placement, the results are not reviewed, but merely taken note of. No measures are derived and no corresponding actions are initiated. As a result, the effect of the forecast fizzles out.

Conclusion: Orientate to best practices

In order to make the forecast process efficient and beneficial, existing procedures must be scrutinized and adapted as necessary. Orientation to best practices makes the forecast much more efficient. In this way, the achievement of targets can be checked regularly in order to detect deviations from the plan at an early stage and to take effective countermeasures.