Error message

Image resize threshold of 10 remote images has been reached. Please use fewer remote images.

Tackling Forecast Bias: Signals and Noise

By Steve Morlidge, Business Forecasting thought leader, author of "Future Ready: How to Master Business Forecasting" and  "The Little Book of Beyond Budgeting" 

The average level of MAPE for your forecast is 25%. So what? Is it good or bad? Difficult to say.

If it is bad, what should you do? Improve…obviously. But how?

 The problem with simple measures of forecast accuracy is that it is sometimes difficult to work out what they mean and even trickier to work out what you need to do.

 Bias, on the other hand, is a much easier thing to grasp. 

Systematic under- or over-forecasting is straightforward to measure – it is simply the average of the errors, including the sign, and is clearly a ‘bad thing’. Whether you are using your forecasts to place orders on suppliers or using them to steer a business, everyone understands that a biased forecast is a bad news. Also, it is relatively easy to fix; find out what is causing you to consistently over or under estimate and stop doing it!

Steve Morlidge is an accountant by background and has 25 years of practical experience in senior operational roles in Unilever, designing, and running performance management systems. He also spent 3 years leading a global change project in Unilever.

He is a former Chairman of the European Beyond Budgeting Round Table and now works as an independent consultant for a range of major companies, specialising in helping companies break out of traditional, top-down ‘command and control’ management practice.

He has recently published ‘Future Ready: How to Master Business Forecasting’ (John Wiley 2010) and has a Ph.D. in Organisational Cybernetics at Hull Business School. He also cofounder of Catchbull, a supplier of forecasting performance management software.

Why Bother with Business Forecasting? From Error and ‘Accuracy’ to Adding Value

By Steve Morlidge, Business Forecasting thought leader, author of "Future Ready: How to Master Business Forecasting" and  "The Little Book of Beyond Budgeting" 

As far as I know we are not legally required to forecast.

So why do we do it?

My sense is that forecasting practitioners rarely stop to ask themselves this question. This might be because they are so focussed on techniques and processes. In practice, unfortunately, often forecasting is such a heavily politicised process, with blame for ‘failure’ being liberally spread around, that forecasters become defensive and focus on avoiding ‘being wrong’ rather than thinking about how they can maximise their contribution to the business.

This is a pity, because asking fundamental question ‘how does what I do add value to the business’ could help forecasters escape the confines of geek ghetto and the dynamics of the blame game and reposition the profession as important business partners.

So why do we forecast? Let’s answer this question by considering the alternative.

Steve Morlidge is an accountant by background and has 25 years of practical experience in senior operational roles in Unilever, designing, and running performance management systems. He also spent 3 years leading a global change project in Unilever.

He is a former Chairman of the European Beyond Budgeting Round Table and now works as an independent consultant for a range of major companies, specialising in helping companies break out of traditional, top down ‘command and control’ management practice.

He has recently published ‘Future Ready: How to Master Business Forecasting’ (John Wiley 2010), and has a PhD in Organisational Cybernetics at Hull Business School. He also cofounder of Catchbull, a supplier of forecasting performance management software.

Five Common FP&A Problems and How to Solve Them

 

After her  round of meetings with financial planning and analysis professionals across the globe, Larysa Melnychuk, managing director of the London FP&A Club, returned with plenty of stories and insights about the challenges they face. Here, Melnychuk reflected on the biggest obstacles FP&A professionals face, and possible solutions to overcome them.

 

Seven Essential Tips for Strategic Finance

by Michael J. Huthwaite, Founder and CEO of FinanceSeer LLC 

Over the past 15 years, I have had the amazing opportunity to work with numerous Corporate Finance teams from around the world in an effort to help them get the most out of their strategic modeling practices. Over this time, I have uncovered a common pattern of reoccurring misconceptions and pitfalls that I believe routinely inhibit companies from maximizing their strategic modeling capabilities. 

In hopes of eliminating these common mistakes, I want to share with you a presentation that I often give to individuals looking to enhance their way of thinking about the very important area of Strategic Finance...

Pages