Important Forecasting Metrics for Medium-Sized Businesses
Forecasting metrics give businesses added insurance regarding business plans. Accurate forecasts enable businesses to avoid unnecessary risks and take advantage of sales opportunities. Accounting software for medium-sized businesses simplifies complex actuarial science into actionable forecasting reports that controllers and other team members can use in business-making decisions.
Look for These Metrics in Accounting Software Systems
Modern accounting systems integrate with ERP systems, secure sensitive data, and deliver predictive analytics on par with the best financial consultants. Technology makes business planning easier than ever – if you know where to look. To make the most of your accounting software for medium businesses, look for reporting capabilities that can deliver insights into the following metrics:
1. Turnaround times for forecasts. Metrics go beyond sales and operating cost predictions. The speed with which a company can access financial forecasting reports also influences its ability to act and outperform the competition. According to an Open Standards Benchmarking Initiative from APQC in early 2016, some companies were able to turnaround forecasts in seven days. In comparison, some of the longest turnaround times were almost 20 days.
2. Recurring revenue. For subscription-based services, recurring revenue metrics can deliver valuable information about future sales potential and opportunities. Use the metrics to evaluate the future value in specific products or services, price any discounts the company offers, and set sales benchmarks for the future.
While any accountant can calculate historic revenue through sale statistics, forecasting software take the evaluation one step further to deliver forward-looking information regarding sales. Specifically, look for information on the customer lifetime value (CLV), the total number of monthly transactions (MT), and average customer retention (ACR) to gain forecasting insights.
3. Sales opportunities and account forecasting. Use historic closing time information to measure sales opportunities, set goals for the future, and create forecasts based on those goals. Sales opportunity metrics aim to identify the value of a sale before it takes place. With the appropriate accounting system and other business tools (including CRM), sales teams can develop a plan of action to turn forecasts into attainable business goals.
4. Forecast accuracy. Regardless of the metric used, accuracy determines efficiency. The right set of data and appropriate estimates leads to realistic and actionable information. This metric is where accounting software systems excel. Instead of manually mining financial data, businesses can set up reports. Employees must only ensure accuracy during the data input stage of the forecasting process. The system takes care of the calculations.
Financial forecasts and predictive analytics capabilities in software solutions today go far beyond revenue and average sales predictions. While systems cannot account for unexpected variables, they do a great job of giving businesses the information needed to manage risk and develop sales and operations strategies. If you can account for the data, you can mine it to create many helpful and goal oriented results.
Medium-sized businesses can use forecasts to confirm business strategies and compete with global and large enterprises. At DSD Business Systems, we help our mid-sized business clients discover and implement accounting and business management solutions capable of delivering accurate and fast financial forecasts. Take control of your business cash flow today, reach out to DSD Business Systems.
Written by DSD Business Systems
