Before KPMG’s online seminar started, I must admit I was skeptical over the implications of the title “The death of traditional forecasting.” I have attended many similar webinars that allude to the promise of transformation as the deciding factor in putting tried and tested forecasting processes to bed. In reality, many of these promises involved little more than ‘rearranging the furniture;’ there was, in fact, little-to-no actual and effective change. 

However, this was KPMG, and I expected more from them. I am delighted to say that I got it! Read on to learn more about my experience of KPMG’s transformational webinar and the key takeaways to take away. 

Enabling forecasting transformation through technology 

The most critical point to highlight first is that KPMG’s idea of transformation is not just tweaking minor aspects of the forecast process here and there. Instead, it is an encompassing transformation that reinvents the process from start to finish.  

Ralph Schatten, Finance Director at KPMG Germany, began by pointing out three key challenges he identifies in traditional forecasting: 

• The delta trap: the time it can take to go back to the businesses and dig into why there are deviances between the budget and the forecast 
• The actual overtake: the time it takes to collect up-to-date data because traditional forecasting is a lengthy process 
• Lost in details: an overload of information dilutes the main focus on the forecast process. 

Linking each of these challenges and using the metaphor of a seesaw, Ralph aptly notes an imbalance between input and output. He states, “You have a lot of input – time and data – but the insight that comes out of the forecast is not as big as the time you are taking to produce this forecast.” In short, modern forecasting must be faster so that output (insight) outweighs input.   

Moving forward, Ralph outlines process transformation and the technology enablement required to succeed. Here, he stressed the need for a robust planning application with world-class reporting and presentation capabilities. 

The death of traditional forecasts and the introduction of an ‘Early Warning’ system 

Ralph notes that the input aspect of forecasting is too intense and complex to address the idea of process transformation. A reduction in effort is required for businesses to redefine traditional forecasting to something more modern and effective. Some of the major highlights from this include: 

• The Office of Finance should be redefined as a business partner and not ‘score keeper’ for the business 
• KPMG Germany forecasts with just three line items – revenue, expenses, and partner FTEs – which is a dramatic departure from traditional forecasting that typically looks across the entire P&L 
• Focus shifts to forward-looking exceptions – the key variances to the plan not already captured in actuals 
• Forecasting is no longer an event but a real-time process where exceptions are communicated immediately through a mechanism KPMG refers to as ‘Early Warning’ 
• When presenting actual results to the exec team, the most current real-time balance of year forecast is shared, along with an explanation of key variances.

Ralph offered these lessons from his extensive experience, which included the need for the finance function to take ownership of the process and the choice of technology to support it. So far, this blog has explored just the tip of the iceberg for where modern forecasting can go for organizations. Watch the on-demand webinar now for more about Ralph’s insights and how he frames the challenges. 

By way of full disclosure, I should note that I spent years in the advisory practice of KPMG and have a lot of respect for the organization. In saying that, I would not risk my reputation to flatter my old employer. The views expressed in this blog are my own, and I back them wholly. I should also add that this new approach is not for everyone and requires strong leadership buy-in to achieve.