How far can you trust the numbers you plan with?
How closely earlier forecasts matched what actually happened. A forecast that is consistently wrong in the same direction is more useful than it first appears, because the bias can be corrected for.
Get a finance reviewWhether the business is winning enough of the right work, at a cost that makes the growth worth having.
See all KPIs →(Actual − Forecast) ÷ Forecast × 100, at a fixed horizon such as three months ahead
Revenue within 5% to 10% of forecast at a three-month horizon is a reasonable standard for an established services business.
How closely earlier forecasts matched what actually happened. The simplest version compares forecast revenue, costs or cash for a period with the actual result, shown as a percentage difference. It is tracked over time, so you can see whether forecasts are consistently high, consistently low or simply unpredictable.
Decisions on hiring, investment and pricing are made on forecasts, so the quality of the forecast sets the quality of those decisions. A forecast that is wrong in the same direction each month is more useful than it looks, because the bias can be found and corrected. A forecast that swings randomly suggests the assumptions, or the data feeding them, need attention.
Keep a copy of each forecast when it is made rather than overwriting it, otherwise there is nothing to compare against. Measure accuracy at a fixed horizon, such as three months ahead, so results are comparable. Look at revenue and cash separately, since a business can forecast income well and still misjudge when it will be paid. When the gap is large, trace it to a specific assumption rather than adjusting the next forecast by feel.
Most owner-managed businesses don't, or they work it out in a way that flatters the result. We'll calculate it from your own numbers and show you what it's telling you.
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