The Importance of Forecasting - But Is Your Modelling Good Enough?
The efficiency of your modelling and forecasting is more important than ever right now. You'll rely on these processes to tell you how to re-open your business, how to develop and how to grow – all whilst maintaining liquidity. They will help you to predict customer behaviour, estimate future sales and assess the likely impact of 'Lockdown' on operations.
Data analysis is vital to business survival. And it's essential that the models you’re basing your critical decisions upon are timely, simple and above all, accurate. But have you checked they meet this benchmark?
While the data you rely upon to facilitate decision making is a topic for another day, the technology most businesses utilise to make these key decisions is 38 years old this year.
That’s right, Microsoft Excel was first introduced in 1982 (though at that time it was called Multiplan) – before cloud working, before mobile networks, even before the internet! Of course, Excel has been updated over time, but when you consider the lightning-fast pace of technology advancement since its inception, we need to be asking if spreadsheets are really the most innovative way to drive business outcomes with precision?
Beware of spreadsheets
Undoubtedly, most data-savvy professionals are proficient with spreadsheets, knowing their way around macros, functions, and pivot tables. But even so, errors are common, even with experienced users. Studies have shown that 88% of spreadsheets contain at least one error. And some of these errors are big – very big!
- In 2018, just before it went bust, Bargain Booze owner Conviviality declared that a £5.2m hole in its forecast was down to a spreadsheet error;
- In 2016, computational errors in spreadsheets used by Lazard, the investment bank, to value SolarCity Corp. when advising on the sale to Tesla, discounted the company by $400m;
- Errors aren’t always financial - in 2017 Boeing sent a spreadsheet containing (in hidden columns) the social security number and date of birth for 36,000 employees;
- Or just reputational - in 2016, the CFO of M&S had to issue a correction statement after quarterly sales figures were revised from 1.3% growth to 0.4% fall due to a spreadsheet summing error.
Clearly, spreadsheets can't eradicate data quality errors resulting from manual data entry/manipulation and, on top of this, once you start manipulating data in spreadsheets, you realise they don’t easily scale to meet your business needs. Common issues encountered include:
- The size of datasets exceeding capacity - you can’t even open large datasets, let alone use functions to manipulate data without the tool timing out or crashing;
- A lack of consistency and relevance - what’s in the dataset? Does the data contain the fields and records my team needs? Is everyone using the most current data or version?
- Outliers, anomalies, and missing values - these can have a significant impact on the model
Since they lack automation capabilities, your team is often working on multiple variants of the same spreadsheet and data, which takes time, effort and causes some of these errors. Although spreadsheets have proven themselves as useful productivity tools for many years, now you need a new level of accuracy, efficiency and ease of use.
Here's how you can do things better
In recent years, a new type of business analytics has surfaced. Services and apps have been developed that readily digest huge amounts of data, across different sources, in multiple formats - centralising and ‘normalising’ data. They contain powerful analytics tools, with pre-configured reports relevant to users and roles. Most extend to visualising insights in simple dashboards and reports. Some embed workflow processes and collaboration tools enabling users and decision makers to make quick, simple, effective, and – most importantly – accurate, data-driven decisions. All without a single spreadsheet in sight.
These tools are available for every size of business. Whether you require enterprise-wide solutions driven by in-house analyst teams or custom functionality bringing insight to your operational KPIs, there is something available.
What are the key benefits of using these platforms and services over spreadsheets?
- Data integrity – single ‘truth’ of accurate data to make decisions from
- Breadth of data – increased data for more informed decisions
- Value - Powerful analytics for insights, generating competitive advantage
- Speed – live insights accessible anytime, anywhere
- Efficiency – saves hours preparing immediately out-of-date spreadsheets
- Collaboration – enforce the power of teamwork
- Scalable – from bespoke requirements to enterprise wide initiatives
- Simplicity – analytics in the hands of users – no need for teams of analysts
At Barcanet, we use Microsoft PowerBI as our preferred tool. It’s simple and effective, and our platform analyses over £50bn of customer data. We have a range of off-the-shelf apps. for procurement, finance and sustainability professionals, and work with customers to develop custom apps to support any of your forecasting, modelling and analytics requirements.
If your team is spending hours developing, rectifying and updating spreadsheet models, talk to us - we can save you time and money, building-out reports and dashboards in a matter of hours that are flexible, accurate and current - email@example.com.
We’d love to hear from you.
To talk to us about any of the information in this blog, please contact firstname.lastname@example.org. We’d love to hear from you.
Ian Yates – Director, Barcanet