One can find many definitions of financial analysis. Investopedia defines financial analysis as “the process of evaluating businesses, projects, budgets and other finance-related entities to determine their suitability for investment.”

One of the realities that FP&A professionals need to realize is people tend to be too optimistic in their financial plans.  People tend to expect higher revenues, lower expenses, or less time to recover the amounts of their investments.  Psychologists label these expectations as optimism bias. As an accountant, I am guided by the conservatism principle.

As we know a simple matter of spotting bias – systematic under or over forecasting – can get surprisingly tricky in practice if our actions are to be guided by scientific standards of evidence – which they need to be if we are actually going to improve matters.

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?