#1 for predictive planning in budgeting and forecasting

Phocas ranked #1 in predictive planning in the “integrated products for planning and business intelligence and analytics category” in the recent BARC The Planning Survey 24. This is a big deal in the planning sector. This survey is the largest and most comprehensive in the world where more than 1000 professional users of budgeting and forecasting software share their real-world experience of these products. The results are analyzed and expertly interpreted to help other business people with their software decision-making.

BARC measured the proportion of software vendors that are using predictive planning in their planning products to determine the rankings. “Predictive planning and forecasting can help to produce meaningful and high quality forecasts, with little effort based on relevant time series to relieve planners of routine tasks and accelerate the creation of forecasts,” says BARC.

How predictive planning works in budgeting

Predictive planning is a sophisticated approach that uses machine learning models to analyze historical data and forecast future outcomes.

Predictive planning starts with the integration of diverse data sources. This includes historical financial, operational and inventory management data. By consolidating this information, businesses can gain a complete view of the factors influencing their financial performance and start applying predictive analytics.

Once the data is collected, predictive models are developed using machine learning algorithms built in the software. These models analyze historical patterns and identify key drivers of financial outcomes.

Unlike traditional methods that rely heavily on manual processes and static assumptions, predictive planning integrates vast data sets and continuously adapts to current information. This dynamic and data-driven approach enables organizations to make more informed decisions and anticipate future trends with greater precision in their budgeting and forecasting.

In Phocas, the budget and forecast worksheets have several built-in options for distributing a value over the period, which saves you a lot of time when entering multiple data points. If you use driver-based budgeting and your budget contains input rows that are based on calculated measures, you can spread a target across those rows. This spread option is particularly useful for sales budgets, where you need to budget sales margin percentages directly in conjunction with either the sales value or cost, rather than budgeting value and cost and needing margins to be calculated separately.

Suppose a sales rep sells several products and each product has a different margin. You want to set a target total margin for the sales rep but keep an equal proportion of the margin between each product. So, a high-margin product still has a proportionally higher margin than a low-margin product. You can do this using the spread target options and can pick whether you spread the same monthly target or mix it up.

Predictive planning is not a one-time process. Ideally, budgets should be revisited regularly, comparing actuals to planned performance as the fiscal year plays out. Your budget model in Phocas is continuously refined and updated whenever new data comes come through the BI (Business Intelligence) platform, providing you with actuals you can trust. This iterative approach ensures that forecasts remain relevant and reliable for real-time data discussions.

Scenario planning in predictive planning

Scenario planning is a crucial aspect of predictive planning, allowing finance teams to prepare sales managers and other business partners for various potential outcomes in their budgets.

Financial scenario planning is used to determine whether the budget aligns with your objectives. If there are risks that can blow out, finance can adjust certain areas before proceeding. In Phocas, scenario planning is executed using the lookup tab in the budget model. The lookup tab is a handy tool allowing you to pull out various inputs, then easily model different scenarios by changing your drivers or assumptions. You might begin by evaluating and assessing their contribution to the desired growth level. You will stress-test outlined strategies, such as selling more to existing customers or expanding the number of people in your sales team, determining high, medium, and low sales data figures for each. This powerful analysis connected to the statistical model helps finance quickly assess whether these tactics collectively deliver the desired revenue increase.

Predictive forecasting with predictive planning

Predictive planning assumes that historical patterns and trends reoccur to a point. Historical data is useful alongside current data in carrying out predictive forecasting. Yet, predictive forecasting is a concept that finance teams are still working towards. Before acquiring Phocas Budgets and Forecasts software, many customers advised us that reforecasting was rarely or seldom done in their businesses.

To help users transition to more regular reforecasting, the Phocas Budgets and Forecasts tool is connected to Financial Statements which ensures reforecasts are based on up-to-date data. The data is automated from your ERP, HRIS and sell-thru data. So, the forecasting accuracy is based on current market trends your business is experiencing and only takes place once you have balanced the books for the month.

In Phocas, users create forecasts that are based on their budgets. To do this, your budget workbook is simply converted into a forecast workbook. You can quickly differentiate a forecast from a budget workbook by the green forecast button in the top left corner and the green forecast flag pole in the grid. The main tab of the forecast workbook has all the same elements as a budget workbook, along with some extras. The most notable additions are the three total columns, which also act as buttons you can use to switch between different views of data - the Total Budget column, Actual + Budget column and Actual + Forecast column. The actual values are displayed to the left of the flagpole and the budget values are displayed to the right, making it easy to see where you’re at throughout the budget year.

Predictive planning enables organizations to make informed decisions and prepare for future challenges. For effective implementation, finance professionals need to select the most accurate forecasting method based on their objectives and the available data. Ensuring that the data is reliable, relevant, and sufficiently extensive is crucial for achieving precise predictions. While recommendations for data size vary, a common guideline is to use at least twice the amount of past data as the prediction period.

Phocas's number one ranking in predictive planning by BARC recognizes the importance of effective planning tools in the manufacturing, wholesale and retail sectors. This acknowledgement, based on the insights of over 1000 professional users, highlights how predictive planning can produce high quality budgets and forecasts with minimal effort.