Forecasting & Financial Reporting
Forecasting leverages historical data and emerging trends to predict future financial results for the business. By definition, forecasting is forward looking. It is a key component in strategic and tactical business decision making and risk management. Forecasting is closely tied to developing and updating financial budgets, resource allocation, performance evaluation and risk management.
Financial reporting provides a view of historical and current financial results. Financial reports are used to communicate results from historical performance to stakeholders such as shareholders, creditors, banks and prospective investors. It relies on a robust accounting process to ensure compliance with accounting rules, segregation of duties, and internal controls to generate reports that support performance measurement, decision support and inform stakeholders.
Larger businesses often separate accounting activities from Financial Planning & Analysis (“FP&A”) though bth may report to the CFO. Smaller businesses may consider outsourcing the FP&A portion to gain the benefits of these specialized skills.
While both forecasting and financial reporting may report to the CFO, there is value in separating these functions since they require different skill sets. Together, both contribute to an effective financial management and stakeholder communication.