Whether your business is looking to A. save money, B. scale up, C. mitigate risks, or D. all the above and more, your finance team needs a financial forecasting tool it can count on.
Let's dive into what features and benefits to look out for when choosing a forecasting tool and explore some of the best financial forecasting software available.
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What is Financial Forecasting Software vs. Financial Planning Software vs. Budgeting Software?
When determining the difference between financial forecasting software vs. financial planning software vs. budgeting software, we first need to break down what each one is:
- Financial Forecasting Software: Helps finance teams predict future outcomes based on trends and assumptions, often based on previous data. This software typically uses techniques like statistical models, machine learning, or time series analysis.
- Financial Planning Software: Helps finance teams set short- and long-term financial goals and strategies to achieve them. Financial planning software often includes features like investment planning, tax planning, and asset allocation.
- Budgeting Software: Helps finance teams set and manage budgets, enabling them to control the company's finances effectively within the parameters of a set budget. Budgeting software includes tools for tracking cash flow and optimizing expenses.
The key difference between these three kinds of finance software is their purpose; however, there are many platforms that encompass all three purposes, such as SolveXia, making it simple to seamlessly toggle between forecasting, financial planning, and budgeting tasks.
Oftentimes, these three functions are intertwined, making an all-encompassing platform a more effective tool than three siloed software systems.
For instance, envision you're making your annual budget. You don't simply pull this number out of thin air. Instead, you're going to use forecasting and planning to inform your decision and come to a realistic number.
What are the Different Types of Financial Forecasting Software?
When determining what's the best forecasting software for your team, think about the different types of financial forecasting tools:
- Modeling Software: This type of financial forecasting tool can help your team envision different scenarios based on your current data sets. Essentially, through complex data analysis and predictive modeling, this software can inform important decisions based on highly educated outcome predictions.
- Time Series Software: This tool uses historical data to predict future values. Essentially, it looks for patterns and trends across a set period of time — whether that be annually, quarterly, monthly, or custom.
- Qualitative and Quantitative Software: Most financial forecasting methods combine qualitative (non-numerical) and quantitative (numerical) data to forecast scenarios for finance departments. The former might include market research while the latter is looking at hard data.
What are the Best Financial Forecasting Tools?
These are several of the best financial forecasting tools for finance teams:
1. SolveXia - Best for All-in-One Needs
If you need a platform that seamlessly combines budgeting, financial planning, and forecasting, SolveXia is your solution.
SolveXia is a financial automation platform that removes the need for spreadsheet-driven data. By connecting your existing systems, SolveXia is able to automate key finance functions, including: reconciliation, rebate management, expense management, regulatory reporting, and more!
This, in turn, frees up your team members' time so they can focus on high-level tasks and strategic initiatives rather than manual processes.
Key Features:
- Intuitive Interface: Drag-and-drop functionality, with no coding requirements. Additionally, pre-built templates exist to make it even easier to automate workflows.
- Unified Data Platform: SolveXia centralizes and stores your data in a single repository, while seamlessly integrating with your existing tech stack.
- Greater Visibility: Increase internal control with status dashboards and visual workflows.
Pros:
SolveXia is an easy-to-use, all-in-one financial automation platform finance teams can easily integrate into their forecasting, budgeting, and financial planning processes.
Once implemented, teams can expect to complete processes 85x faster with 90% fewer errors. Simultaneously, you can say goodbye to key person dependencies and gain access to real-time dashboards and insights for informed decision-making.
Plus, you don’t have to rely on IT involvement to reap all the advantages.
2. Cube - Best for Ease of Use
If you're looking for a system that can easily integrate your Google Sheets and Microsoft Excel, then Cube might be a good option. Cube is designed for more effective planning, modern reporting, and proactive decision making.
Key features:
- Real-time Reports: Cube enables users to create accurate reports without all the tedious manual data consolidation.
- AI Features: Cube's AI models can help you generate predictive forecasts.
- Robust Resources: Cube has a large resource library for users, including a Slack community.
Pros:
Cube offers custom pricing.
Cons:
There is a heavy dependence on Excel, making it a limited option for those not interested in extensive spreadsheet functions.
3. Workday Adaptive Planning - Best for Advanced Forecasting
Workday Adaptive Planning has advanced financial, workforce, and operational planning features. This tool combines AI and machine learning to offer better connectivity and scalability.
Key features:
- Financial Planning: You can use this tool for scenario planning, flexible budgeting, and forecasting.
- Marketing Planning: Workday has tools that can help you build a strategic marketing plan.
Pros:
There are countless uses for this forecasting tool.
Cons:
Users might experience a steep learning curve.
What are the Benefits of Financial Forecasting Tools?
Here are several benefits of financial forecasting tools:
- Time and Cost Savings: By automating the forecasting process, businesses save time on data collection, entry, and analysis. This reduces the reliance on manual work and minimizes errors, leading to cost savings in the long run.
- Support for Growth and Expansion: As your business grows, financial forecasting tools help project future needs for staff, capital, and infrastructure. This supports scaling efforts by providing a roadmap for expanding operations while keeping financial health in check.
- Better Strategic Planning: Financial forecasting tools support long-term planning by projecting future trends in revenue, expenses, and profit margins. This helps your organization set realistic goals and create strategies for sustainable growth.
- Improved Risk Management: Forecasting tools can help you identify potential financial risks, such as declining revenues, increasing costs, or cash flow issues. By recognizing these risks early, you can develop strategies to mitigate these risks.
- Better Budgeting and Resource Allocation: You can create more accurate budgets by using historical data and projections to anticipate revenue and costs. This allows your finance team to allocate resources efficiently and avoid over or underestimating future financial needs.
What are the Key Challenges for Financial Forecasting?
When determining key challenges with financial forecasting, consider these financial forecasting examples:
- You're Unable to See Data in Real-Time: Outdated financial forecasting tools might require you to still manually enter data and then compile your own reports.
- Your Forecasts Aren't Accurate: If your predictive modeling is giving inaccurate predictions, then there is little use for financial forecasting. You need a software system that is highly accurate.
- You Have Complex Business Operations: Sometimes, it can be difficult for software to make predictions for highly complex, larger businesses. This is especially true for businesses within highly volatile industries or ones with departments that have competing priorities.
What are Key Features of Financial Forecasting Software?
When choosing a financial forecasting tool, you need an option that encompasses all the features on your team's wish list. Here are several key features of financial forecasting software you might consider:
- AI and Machine Learning Integrations: Look for a tool that uses AI and Machine Learning for more advanced predictive modeling. With these integrations, your software can find hidden patterns and more effectively predict future trends.
- User-Friendly Dashboard: Creating dashboards, charts, and reports that summarize your forecasts can be a breeze with the right tool. Along with helping your team easily create these visuals, you can prepare better presentations for stakeholders.
- Scenario Analysis: Of course, when forecasting, there are typically multiple outcomes to consider. Find a tool that can run multiple "what-if" scenarios to help you with decision making.
- Rolling Forecasts: As external and internal factors evolve, so should your forecast. Look for a tool that can adjust in real-time as it receives new data and key information.
What are Financial Forecasting Methods?
Financial forecasting methods are the techniques you use to predict financial outcomes based on historical data, assumptions, and market conditions.
These methods can help your team plan for future growth, manage risks, allocate resources, and make more informed decisions. Common financial forecasting techniques include:
- Time Series Analysis: Analyzes historical data points (e.g., past sales, revenues, or expenses) to identify trends and patterns over time.
- Regression Analysis: Looks at the relationship between one dependent variable (e.g., sales) and one or more independent variables (e.g., advertising spend, economic conditions).
- Econometric Models: Use statistical methods to incorporate economic theory and quantitative data to forecast financial outcomes.
How to Conduct Financial Forecasts?
In order to conduct your financial forecasts, start by:
- Collecting relevant historical financial data, such as revenue, expenses, and cash flow.
- Choose a forecasting method, such as time series analysis, regression, or expert judgment, depending on data availability and your business' needs.
- Identify key variables and assumptions influencing future performance and then use statistical tools or forecasting software to create projections based on these inputs.
- Regularly update forecasts to reflect changing market conditions, economic factors, or operational shifts.
- Analyze the forecasts against actual performance to identify discrepancies and refine future forecasting accuracy.
- Consistent review and adjustment ensure you have reliable financial predictions.
How to Choose the Best Financial Forecasting Tool
When choosing the best financial forecasting tool, you need to ask yourself some important questions to ensure you’re making the best decision for your team:
- Price: How much can your company spend on a financial forecasting tool?
- Features: Does this tool check off all the boxes on your team's wish list?
- Benefits: How can you envision your selected financial forecasting tool benefiting your team? Will it save you time? Will it help your company grow?
- Usability: Is this a tool you can implement right away or will it require intense tech support? Does your team have the capacity to start using a new platform?
The Bottom Line
When choosing financial forecasting tools, there are a lot of factors to consider. If you’re looking for a finance automation tool that has advanced forecasting and financial planning capabilities, look no further than SolveXia. With SolveXia, you will be able to execute processes 85x faster with 90% fewer errors. Interested? Sign up for a demo here.