Managing Data For More Accurate Projections

Written by: Kymberli Cassidy

Financial projections are essential to managing a business. The problem is, they aren’t always easy to figure out.

One of the most critical factors in making projections is how the data is managed. This can affect how accurate projections are and how easy they are to make. If we can’t trust the data we’re using to make projections and give the right insights, we might make the wrong decisions.

Common Problems with Data Management

If we have disconnected data stored in multiple systems, it requires manual work to pull the data, put it together, and interpret it. At that point, the data is already old and might not be telling us the correct story. Without the data in one system, we also have a more challenging time getting a holistic view of the company’s financials. We need that functionality, especially if there is more than one leader responsible for handling a section of the business and that data; we need a way for everyone to see how their part affects the financials of the whole company.

Another common problem with data management is that not all systems give you the visibility to look far enough into the future. This is essential to see what’s coming and how it changes based on what’s already happened and continually check in on the progress. If we are only looking into next month, we are already behind.

Considering all of this, how can we trust that the data we are using informs accurate financial projections for our business?

To solve these problems, we need a better data management system. We need one system that stores all our data to look back at what happened, and we need it to provide insights as to why those variances occurred. We need to look at that system and see the data in real-time, not wait until we audit the last month’s data. We need to be able to ask what-if scenarios and easily see what’s affecting changes in the forecast to know what action to take. A system that we can trust to manage data and help us understand it is key to spending our valuable time solving problems and preparing for them in advance instead of manipulating data to figure out where the issues are in the first place.

Improving Financial Projections with Future Visibility

If we can’t trust our data and have low visibility into the future, we don’t know what we’re predicting is correct.

Future visibility is essential to making decisions in a business. It influences how we manage our clients, projects, staffing, sales, and investments. The farther forward we can look in our data, the more we can eliminate the risk of making decisions today.

Visibility also allows us to see if we are approaching a cliff—where the financials suddenly drop—and make changes to avoid it. The further out we can look in the data, three months, six months, etc., the sooner we see the cliff coming. Cliffs can be caused by a few things, like projects starting and ending simultaneously and your bench being too full without projects to put the people on. This ability to see cliffs far out in the future allows you to better plan projects, sales, and client contracts to prevent them and keep a steady revenue.

Improving data management can help inform more accurate projections in the long run. We need to be able to trust our data, look at it in real-time, and have visibility into the future that allows us to inform better projections. The more precise the financial projections are, the more we can lower the risks when making decisions. This can positively impact growth, increasing revenue, investments, and the functioning of the entire company.