How can financial forecasting be improved and automated?
Efficiency question :
Financial forecasts are generally part of an organization's budgeting process. Once the budget has been prepared in sufficient detail, the next step is to monitor results and compare forecasts with actual data.
Automation makes this comparison dynamic. As actual data becomes available, it can be displayed alongside budget data so that variances can be identified quickly.
The objective is therefore not only to produce financial forecasts, but to have a tool that tracks their evolution and easily identifies results that differ from expectations.
Key considerations:
The main consideration is having actual data that is sufficiently up to date to make a meaningful comparison with the budget.
When the budgeting process has been completed in detail, it is particularly useful to display actual data directly beside budget data. Variances can then be calculated and monitored as new data becomes available.
To make this monitoring effective, visual elements can draw attention quickly to variances that require analysis.
Challenges:
The level of detail in budget data and actual data must be comparable.
When the budget presents information at a higher level than the actual data, several general ledger accounts may need to be grouped before they can be compared with a single budget category.
This correspondence must be established correctly so that the variances shown are meaningful. A dynamic display is truly useful only when the compared data represents the same elements and is presented at the same level of detail.
Technology:
In Microsoft Excel, conditional formatting can automatically change the appearance of cells based on their results. It can be used, among other things, to draw attention to certain variances between budget and actual data.
It is also possible to go further by using shapes whose appearance changes dynamically according to results. These techniques make it possible to create more visual reports in which significant variances can be identified more quickly.
These methods are covered in SLV Expert's Create Your Dashboards with Excel training course.
Developer's advice:
When the number of visual rules becomes significant, VBA can be used to program changes to the report's appearance directly based on results.
This approach differs from conditional formatting. Rather than attaching multiple rules directly to cells, programmed instructions determine how report elements should be displayed.
For reports with a large number of display rules, this approach can reduce the amount of conditional formatting in the file, resulting in a lighter file that is easier to handle, save, and transfer.
Regardless of the method used, the objective remains the same: visually highlight significant variances so users can quickly identify results that require attention.