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Survey: Forecasting Services to Remain in Demand in 2021

  • By AFP Research
  • Published: 12/11/2020

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In years of economic and financial volatility, management demands a higher level of forecasting to interpret impacts emanating from the changing business landscape. FP&A met this challenge in 2020. Demand for forecasting services increased throughout the year and is expected to remain at an elevated level in 2021, according to a new survey.

In August 2020, AFP conducted the 2020 AFP FP&A Survey, underwritten by Workday, Inc.  AFP surveyed FP&A professionals about tools they are using to examine and analyze data and received 484 responses.

FORECASTING IN HIGH DEMAND

The survey found that this year’s coronavirus pandemic, economic shutdowns and information uncertainty led business management to demand a higher level of forecasting to interpret impacts emanating from the volatile business landscape. FP&A met this challenge in 2020, as 23% of FP&A teams forecasted on a daily or weekly basis in 2020, up nine points from 2019. Similarly, a larger share of organizations has been forecasting on a monthly basis in 2020 than in 2019 (56% compared to 43%). These trends of forecasting more often are projected to accelerate in 2021.

Smaller companies are more likely to reforecast within two weeks—70% of smaller companies (with annual revenue less than $100 million) and 69% of mid-sized companies (with annual revenue between $100 million and $1 billion) do so, compared to 56% of larger companies (with annual revenue of at least $1 billion).  

The implication is that FP&A needs to execute forecasts quickly, since it is completing them more often, both on routine schedules and based on unscheduled events. Failure to do this implies that forecasting will consume organizations’ time, limit FP&A’s effectiveness, and limit its ability to attract and retain talent.     

DATA-CENTRIC FUTURE

The current and projected increase in forecasting is part of what FP&A professionals see as a data-centric future. Fortunately, two-thirds of respondents use a dedicated planning system, and automation has found deep penetration in reporting. These systems require a significant investment in software, data, people and processes, representing a significant improvement in capabilities over spreadsheets alone.

Unfortunately, spreadsheets and manual processes remain the bedrocks of operations in both planning and analysis, and FP&A still spends half its forecast time in data gathering and data preparation, the same percentage as a decade ago. This is both a cause and effect of lacking end-to-end data flows through finance.

As a direct response—and maybe a threat to current practitioners—nearly 40% of FP&A respondents indicate they have hired IT and data professionals directly to join their teams, either to manage data or to train as analysts. But the application of advanced tools remains out of reach at many organizations.

“It’s imperative that FP&A gets this right,” said Jim Kaitz, President and CEO of AFP. “Such increased demand for FP&A’s services requires efficient process execution; otherwise, forecasting will absorb all the team’s time and resources.”

“Throughout the pandemic, we’ve seen organizations around the globe fundamentally change the way their businesses operate. From shifting forecasting yearly to quarterly, to even daily, embracing uncertainty has evolved the way leading companies leverage automation in scenario planning and continuous planning to thrive in this new normal,” said Michael Magaro, Workday Senior Vice President, Business Finance and Investor Relations.

GOING BEYOND SYSTEM IMPLEMENTATION

Implementing a planning system is a stop on the journey to better information management, not a destination by itself. It is difficult for legacy systems to keep pace with organizational and external changes, so teams create shortcuts and temporary solutions that become the new pathways to execution. Systems in place require constant attention to keep them relevant; out-of-network model proliferation must be checked; and strong data governance should provide the structure for all models.

Download the 2020 AFP FP&A Survey: The Technology and Data Platform Supporting Finance Decisions.


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