Why AI forecasting can help, but it is not 100% accurate for your business financial planning?
Can AI help me forecast?
AI can be a great tool to create a baseline forecast as a starting point. Then, you want to create a process to apply adjustments to meet the realities of your business and create a more useful forecast for your business. AI will rely on past data and continue to forecast similar patterns which limits the company’s ability to break into the next level of growth. It also indicates that what has been done will work again and that environmental factors, market risk, owner future decision/direction, industry trends and changes wouldn’t be accounted for. While AI can provide a first draft of the forecast, there are some real life adjustments that have to be considered and implemented into the forecast to make it more useful.
Necessary Adjustments
Considerations such as seasonality, adjusting for known parameters, adjusting for accelerated growth strategies, new upcoming hiring plans are part of the parameters AI wouldn’t know to use unless it is instructed to do so. An experienced CFO (like our team) would ask the right questions to predict some of the potential outcomes and weigh in new opportunities that align with where the business is going. Not always is the client willing or able to provide all the context that matters unless we ask. Also, we know from experience it is something hard to connect the dots around what the data and trends are telling us about the business.
Data Interpretation & Analysis
Forecasting trends and analyzing them is part of the job of a CFO. Understanding the connections between allocation of resources and expected outcomes is a skillset. Making sure the data in the forecast makes sense, aligns with the company goals, and is working in harmony is crucial in business projections. Tying the forecast to actionable steps that enable progress towards achieving the goal is the expected outcome of a good forecast. For example, you want to grow top line revenue but you don’t have a marketing investment tie to that growth. You also forgot to outline a hiring plan to make sure you can deliver goods or services at this new increased rate. Those are just a few examples of how data analytics help spot trends and connection missing which can be adjusted to make goals more achievable.
AI in experience hands
AI is a great brainstorming tool when it comes to new ideas and exploring possibilities. AI also makes up fake answers and provides data that is not reliable. This is where an experienced CFO can help maneuver and fail test the forecast based on past experience. They will leverage their critical eye and spot concerns. Relying on generic forecasting or not sophisticated thoughtful forecasts can steer a company in the wrong direction. The forecast should also be created after the business growth plan strategy has been thought through. Then, the numbers will be more meaningful and actionable.
AI is a powerful tool and can be utilized to help develop a baseline forecast under experienced CFO hands to create a comprehensive financial plan. If you are exploring AI forecasting solutions, make sure you consider hiring a CFO, make the necessary adjustments, review and analyze the forecast with a critical eye to ensure it is realistic and aligns with your company's financial goals.
If you need help creating a forecast for your business, make sure to book a free Q&A call to discuss your support needs and how you can outsource your forecasting to our team of CFOs.