Financial executives know the importance of forecasting and should be familiar with the essential features of financial projection software. After all, this program provides mission critical information for the overall health of your company. Experienced finance professionals may remember the days when they had the arduous task of manually compiling these numbers. Technology has certainly improved the process tremendously. However, without the proper functionality, it is easy to find yourself back in ancient times. This is why it is important to choose your forecasting program wisely. If you are in charge of the financial reporting for your company, read on for the essential features of financial projection software.
Easily Adjust The Assumptions
When comparing software features, financial professionals need an application that can easily adjust the assumptions. As the fiscal leader, you know that it is customary to strategize for the worst, best and probable scenarios. But there are times when situations arise that you could not have accounted for when you initially made the forecasts. Take, for example, an unprecedented global crisis like a pandemic. This could upset either extreme depending on your industry. Regardless of which end is disrupted, you will want to have the ability to easily fine-tune the assumptions you make. The financial projection software you choose should allow for that flexibility. Having the ability to easily adjust the assumptions in your program will help you properly plan for the future.
Extended Projection Period
If you work for a startup company, then looking three years into the future can be considered an extended projection period. Nevertheless, financial professionals should expect their financial projection software go beyond the standard 36-month timeframe. Making assumptions for the next five, seven or even ten years can be critical. This gives you data that you can then compare to industry-specific information. In turn, you will be able to establish where your company ranks against the competition. Armed with those facts, financial professionals are then able to make changes accordingly. The extended projection period software feature is important because it aids in the all-important strategic decision-making process. Thus, allowing finance gurus to further refine their assumptions.
Unlimited Number Of Projections
Some of the best financial forecast applications allow for an unlimited number of projections. Without a doubt, fastidious financial executives should consider this an indispensable feature. After all, being restricted to a finite number of projections prevents you from covering all bases. This could be detrimental since you are responsible for all of the “what if” scenarios pertaining to company finances. Moreover, it makes sense that this shortcoming could prove to have a negative effect on your company’s bottom line. If you base your forecasts on many assumptions, choose a financial projection program that does not impose a limit on the total scenarios.
Integration With Other Financial Tools
Integration with other financial tools is a crucial component of financial projection software. After all, keeping your estimates as a static document will not permit a rolling forecast. For this reason, many applications connect with accounting applications and spreadsheets. Others integrate with customer relationship management systems and human resource data. These links are vital to the overall well-being of the company since they continually update the projections. Additionally, the automation eliminates manual entries and errors which can cloud decision-making. Ultimately, it is up to financial professionals to decide which integration with other financial tools make sense for their company.
Given the sophistication of financial projection software, it seems logical that these applications would have a built-in audit trail feature. But that is simply not the case with approximately one-third reporting the absence of that functionality. Having access to an audit trail allows you to keep a watchful eye on those employees who have access to the system. As the executive in charge of finances, it is imperative that you know who is running reports and submitting them. Furthermore, you need insight on the status of all deadlines—who has met them and who has not. This feature is particularly useful when you are in charge of multiple departments.
Choosing the right financial projection software requires an assessment of the central features. Financial professionals need an application that provides flexibility. For example, it is important to have the ability to easily adjust the assumptions you are making. Additionally, you should not be bound by short forecast periods or limited projections. Moreover, your financial projection software should integrate with other financial instruments to help with rolling forecasts. Lastly, you should verify that the application has built-in audit trail. As a financial professional, you recognize that creating accurate forecasts is key to business financial health. Hence, you should consider these essential features of financial projection software as you evaluate your current application.