What do you do if your financial forecasts are inaccurate?

Take full responsibility to account for the error made, learn from it & do not repeat the same mistake. It is important to support the financial forecast numbers with underlying assumptions which may be cross referenced to detect the cause of the error.

First of all, recognizing that there is a mistake is not just a first step, I think it's at least 50% of the solution. When the mistake is recognized, it makes the vision clear and makes all the elements look at the next step. What's wrong? Once, when doing a budget, I surprised everyone with a shocking tendency to say that this budget, for which I am primarily responsible, is wrong and cannot be sustained. The response from senior management was very professional. Please make a new budget with identifying the old error and how to eliminate it.

In my opinion we all passed through it during corona time, but we must take a fast action and open a discussion on how we can effectively manage and address discrepancies in our financial forecasts with porposal. It is important that we identify the root causes of these inaccuracies and implement strategies to mitigate them in the future. So we should schedule a meeting to review the current forecasting process, analyze the factors contributing to inaccuracies, and brainstorm potential solutions to improve the accuracy of our financial forecasts with top management.

Analyzing forecast inaccurate Causes can illustrate failures reasons. 1- Outdated assumptions. 2- Misleading data 3- Wrong equations. 4- Changes in external environment (Market, economy or legal) Analyzing failures and learning from it helps in refining assumptions, considering the new information and finally tests the revised forecasts.

Keep up to-date with the latest happenings & stay alert by keeping your ears on the ground. KYC as in knowing your customers & knowing your competitors will help in rectifying & improving the financial forecast going forward.

Here comes the most important step, what is a mistake and why is it a mistake? You should do some analysis about the mistake and how it led to this mistake, whether it was a wrong expectation or wrong information.

Adjust forecast by involving & brainstorming the forecast numbers with other relevant departments such as the sales & marketing division on which the financial forecast was built on. Get a better understanding from them on their strategies on how best to achieve the objectives & goals set in their respective divisions to ascertain how realistic or accurate are those numbers to be applied to your financial forecast before applying them.

After admitting the mistake, identifying what is wrong and analyzing it, it is time to adjust and here you have to do some analysis to avoid the same type of previous mistake and apply some equations to make sure that the balancing works in the right way, Then you start with the measurement rates and follow up on what happens to measure the deviations and the appropriateness of the plan to reach the goal.

You have to put the mistakes of the previous plan and the modifications of the new plan, explain the difference, and clearly communicate this information to all participating departments and decision makers.