Do you forecast optimistically?
The pros and cons of optimistic business forecasting.Forecasting is not an exact science. Former veteran weather forecaster Michael Fish learned this to his detriment in 1987, when he failed to predict a hurricane was hours away from wreaking havoc in south-east England.
Where finance is concerned, it is an art that can be honest, dishonest and numerous variations in between. Andrew Thewlis, finance director of food and drink wholesale buying group Unitas Wholesale, says forecasting boils down to interpretation of data.
“Fundamentally, honesty is the best policy, but honesty is interpreted in different ways by different people,” he says.
Most FDs and CFOs are truthful, he points out – it is just a question of how much of the truth they share. “That’s where the interpretation comes in,” Thewlis explains. “You have to make a set of forecasts based on a set of assumptions and those forecasts are true in relation to those assumptions. But how accurate are the assumptions?”
This is an extract from the Business & Management Magazine, Issue 271, February 2019.