Roundtable Event on Rolling Forecast

Welcome, everybody. We're excited to have you here for our roundtable event on rolling forecasts brought to you by Plan Buddies. Before we get started, we're going to have a quick countdown here, and then we'll jump into the agenda. I mostly just like to listen to that music, so I play it now. Welcome. We see Vernique out there from hot Texas. Yes. I'm in relatively hot Utah, probably not as hot as Texas. But if you're out there listening, please let us know where you're coming from. All right, we got Jorge from Tijuana, Mexico. So welcome, Jorge, please, again, if you're out there, let us know where you're coming from. I know we have people on multiple platforms. We got Streamyard, we got LinkedIn, we got YouTube. So feel free to let us know what platform you're coming from, what you hope to gain from today. So why don't we start by doing a quick round of introductions. I'm guessing most of you know me. My name is Paul Barnhurst. I'm known as the FPNA guy. I'm fortunate enough to have with me my two co founders, Lauren and Derek, for Plan Buddies. And today I'm going to grill them. I mean, host a roundtable discussion about rolling forecasts. But before we jump into that, we got Kimberly joining us from Wisconsin, another one from Mexico City. You can see him coming up on the screen. Vernique says Mexico has been hotter than Texas. They're both too hot for me. So that's all I need to say on that. So why don't we start by going around and doing the rest of these introductions. Lauren, tell us about yourself.

Hi. Thank you, Paul. Thank you everyone for joining us. For those who don't know, had the fortunate enough to work with Paul and Eric on establishing plant bodies over the past couple of months in the FPA space for over 25 years. So almost since my childhood. Just kidding, of course, and happy. Everything about business planning, enterprise planning, entrepreneurial, and the technology around it.

Great. Well, thank you, Lauren. Derek, he's the baby of the group.

I am the young blood. I am Derek Baker. I work at a company called Circle, which is what we use to host the community platform right now, Plan Buddies. So we're using Circle as our software vendor for that. And I've been FP&A for almost four years, so I'm pretty early in my career getting started. And the reason why I love the idea of Plan Buddies is because I've seen how much community has helped me in my FP and a career so far. Getting to know Paul Paul's made a lot of introductions for me throughout the last several years that we've known each other and taking that community and being able to bring it to more people through our online community of Plan Buddies is something that I really want to do. And it's been really helpful for me as we've been building it out. And I think we've been able to help a few other people as well. I've joined the community. Yep.

So we love that. That's why we do these events. They're all part of our Plan Buddies community and our vision and goal is to create the number one planning community globally. That's what we're working toward. And if you're not a member, we'd love for you to check it out. You can always join. And today we're going to focus on rolling forecasts. Before I do that, I know we have a few other people out there. I can see the numbers. So please let us know where you're coming from if you haven't yet. And then also feel free to let us know what you hope to get out of today. If you have a question about rolling forecasts, throw them in the comments and we'll get to them before we're done. But I'm going to start the questions here. Derek, you know, it's why do we need rolling forecasts? We have a budget. What's, what's the benefit of a rolling forecast in your, from your perspective?

I think that the major benefit of rolling forecast is that they can be dynamic as the company changes. When we set budgets, we often set them with one year in mind, maybe, maybe even reforecast every quarter. But with a rolling forecast, usually that implies that it's rolling on a certain cadence, weekly, monthly. And when we can roll forward the forecast, we can see changes that are happening in the business in shorter timeframes than every quarter every year because business is changing more frequently than those cadences. So I think that's why it's really important is so that we have just a more up to date view of how the business is trending and what direction we're heading.

Makes a lot of sense. Laron, your thoughts on that? I mean, from your career and what you've seen, why are rolling forecasts important?

Well, you know, it was sometime a sometimes ago, it used to be a debate, do we need any forecast? Like isn't it enough to have all this budgeting headache once a year and then just, you know, keep moving until the next budgeting season is arriving. That's no longer true. I think we are living in such a dynamic reality environment, business, technology, everything around us. If we are not having rolling forecast, we're not really getting a better or good understanding of what is happening in our company. So rolling forecast number one is really our indicator how are we doing and how we should be changing.

Appreciate that. And it seems we've had a few other people join us. So Carolina, welcome. Eric, we got Derek here monitoring some of the comments, helping us out. I'm used to kind of monitoring them and talking. So this is different for me. I'm going to be like, oh, I have someone that can do that. But one thing I'll share when it, you know, kind of comes to rolling forecasts is just think of the, think about your own budget. You start the year and think, hey, I'm going to make a certain amount of money. If you got a promotion, something changed, you would adjust your forecast for the year. Like if a big car expense came and all of a sudden you had to buy a new car, you're probably going to look to reduce spending elsewhere. You may not always map that out like we do in a company or if you think of supply chain planning, I guarantee you if there's a change in the economy, they're adjusting all that. You don't want a lot of leftover inventory. And as planning becomes more and more company wide, they're hung together. A lot of times the financial wasn't connected to the operational becomes even more and more important that you're updating that financial and that it's all flowing together. And as Laurent said, just look at.

The world right now.

We are in a different world than we were before in the the just the amount of change and uncertainty over the last couple years, interest rates, inflation, so many other things. It's more important than ever. So we're going to go to a question. I think this gets to what Vernique asked Derek. You've been at what, three or four companies now in your career and a few internships as well. I'm guessing you've seen rolling forecasts a number of them. You probably implemented some of that process. So what have you typically seen? Maybe talk a little bit of how you've seen rolling forecasts work or how you've implemented them yourself.

Yeah. This is something we're going to talk more about later this month in our FPA for Startups event. So just a quick plug for that. But I think the question is like how does rolling forecast, how do rolling Forecasts fit inside of the broader FP and a cycle because we still make budgets at the FP or at my startups I worked at every year. But as the market changes, as you learn more about your startup, you have to make changes to the way that you go to market, the way that you price things and that budget becomes stale really, really quickly. And so rolling forecasts are super important at startups because it seems like every month there is something that's changing, a key assumption that's changing whether that's the way that you're pricing, the way that you're selling the product. Maybe you introduce a freemium model, something like that. And so the models are very dynamic and they are changing all the time in a startup. And so having rolling forecasts that you can update every month without having to dig into every single expense line item or things like that is really helpful. And the way that I went about this was making sure that there are drivers attached to all of the most important parts of the forecast. So I try, I try to follow the 8020 rule. There are certain line items that you don't need a driver for and you can just forecast it as a rolling three month average or a percent of revenue or something simple like that. But for the really important things like your hosting expenses or your head count or things like that, attaching a driver is the best way to build these rolling forecasts in a way that isn't taking hours and hours and hours each month.

Yeah, there's understanding your assumptions, building a driver. If a rolling forecast is taking you a week to do, you probably need to simplify your model or think about it and we'll get more into that. But Ron, what have you seen? And you've seen companies implement them, what you know, what have you typically seen work. And then I'll follow that up with another question, but I'll start there.

I have actually a secret formula for the forecast process. Well, in a couple of minutes it's not going to be a secret anymore. Right.

Getting ready. Go secret.

So you know the best practice, Only four stages. This is what we need to make sure if you want to have a proper process for our rolling focus. The first one, and this is very much aligned with what Derek said, we always want to start forecast with a bottom up collections of data, but not just the financial data, that's easy. The financial drivers or the operational drivers. Right. So that's stage number one. If you're not collecting your operational driver, I would say probably not the best forecast because you can't really get insights into the business. So that's stage number one. Second stage. You want to calculate not only the financial results but also your KPIs. KPIs are important because again KPIs are telling you are you meeting really your business plans? Is that really in alignment with your strategy? Right. So stage number two, calculating KPIs and financial results. The third stage here is what are the executives have to say for that Data collections. Do they believe in that? Is it looking good to them? Do they want to reallocate resource to do some other type of executive decisions around that? And once we did those three stages, the four stages, the easiest one, that's our baseline for next month. That's it. Four stages. You start battle map, collect drivers calculating KPIs executive actions and that's the baseline for next month. As easy as it sounds, that's how it should be.

I like it. So I'll share a little bit of my experience. I worked at American Express. When I came in we had rolling forecasts but we had. They were almost as not quite as painful but they were often as painful as the budgeting cycle. When I first came in we went through a full blown forecast. It was a 12 week process. We did them once a quarter so took a good portion of the year in that you'd start them a month before, you'd finish them a little bit after the quarter, probably about eight weeks. And they the company realized that was just too long. That was not an efficient way to do a rolling forecast. And so we went to an R and O process with a rolling forecast where we said just focus on the high level risks and opportunities. And I've rolled that in at other companies because it's a great way to find that the balance because I think and I'll get your guys thoughts and I'd love thoughts from the guests. What happens sometimes is that forecast becomes detailed and it just becomes too much work. So it's finding that right balance. It shouldn't take you away from supporting the business. It should help you support the business and figure out what's changed. So Derek is I kind of mentioned that. Any thoughts there on what I just said about that of kind of RNOs and how you ensure that the forecasts don't take over managing the business if you go to a rolling forecast and you're on mute. Derek. So I'm sure whatever you said was wonderful but we didn't hear it.

Thanks. I think the risks and opportunities method is a really good one. Especially if you have if you're a really big business and there's a lot of things that are changing within different business units or different departments, it's a way to simplify that and just focus on the things that actually matter and without having to reforecast the budget every single month. That said, that method isn't as helpful for me in my companies at startups where we're doing less than 100 million in revenue and our models, we focus a lot on making them dynamic and easy to update so that we're not spending days or weeks reforecasting each month. I think there's a good post from Chris Riley on LinkedIn about if your model is taking more than a few hours to update every month, you built a really bad model. And he's talking about specifically in Excel and FPA tools do a lot to get rid of those headaches. But yeah, I think in the risks and opportunities methodology you focus on the things that actually matter. Like did our north region miss their sales quota and you add that in as a risk or did our one business line outperform their expectations? You add that as opportunity. I think that makes a lot of sense when you have a lot of complexity in your business model.

And yeah, no, I agree and I'm just going to address this comment here from Vernique and then we'll come to you. Lauren. Unfortunately our rolling forecast were detailed. We had to have numbers for each account line. Ranique I worked at a company where they made us do current year plus 36 months at a detailed level including loading to account lines, the head count and the revenue and everything. And it there was no value in my view going that far out. And so that's something I would love to get the thoughts how, how far do you think is kind of a good, good range to go out when you're doing a rolling forecast? I mean should you go out 12 months, 18 months, 6 months? Any thoughts on that or at least how should you think about that? We'll start with you Laurent.

I want to be kind of a little bit unstandard in my answer, but most companies are doing just for the current fiscal year, which is, it's a very easy way but in many industries I think there are missing opportunities with using current year only. I like the concept of 13 months. So the idea is that you always using the data that you already had in order to focus the next year as well. What I'm trying to say, let's take an easy example here. Let's think about retail companies. We Just a couple of days after Memorial weekend retailer learned something out of Memorial weekend, right? Have they been meeting their expectation? Did they give too many discounts, too little? What There were kind of main insights around that. If we take a standard retailer that is doing, let's say budgeting on a fiscal and that is equal to the calendar year, that means that all the information, all the data they grab over the past Memorial weekend will not be really useful for them for the next year planning because it will take a couple of months until budgeting season start and then you go through different KPIs and you know, sometimes all the data you collected from just, you know, couple of days ago is disappearing. However, if we are building our forecast in the concept of falling 12 or 13 months, you will be able to use the current data, your current information for a bit longer period and use that sort of an experience for a better projections on a rolling 12 months basis. So I like this concept, but with that being said, it definitely depends on the size of the company, the growth, the driver, the maturity and many other factors, but definitely something to consider that not many companies are doing.

Derek, what's your thoughts that you have a kind of a preference or a way to think about how far out you should go with the rolling forecast?

My so my philosophy for again cash burning startups is you should forecast out however long you want. Runway your Runway to be plus six months because you need six months notice to do fundraising. So that's my personal philosophy for a cash burning startup. I think for profitable companies you should forecast for whatever time period you actually think you can affect. Now I would be surprised if you actually think can make changes today that impact longer than 18 months out. Beyond that I think that it's just a guess. That said, I like to build my models out three plus years, but I don't actually forecast longer than 18 months. And then everything from month 19 beyond we use what I like to call out year levers, which is its own separate part of the model where we're like this is where we want to go long term and it's modeled completely differently than the way that we model the first 12 to 18 months. So that's how I handle that because I like to look out long term and have a sense of where we're going directionally as a business. And how is what's happening in the next 18 months impacting that long term vision?

Yeah, but you just got to that next question. So I think what you're going to hear here is everybody's going to have a little different opinion. A lot of it comes from the industry and your experience. Most of mine, like I said I had the one company where he did three years out was always current year plus three. When I was at American Express we did high level planning but the actual plan enrolling forecasts were just current year. You know I tend to like something of at least 12 months out. Sometimes you might need longer. I definitely think three years is too long. I wouldn't especially at a detailed level. I think high level assumptions that's fine to kind of give some general ideas because there's times when you may need it which I kind of, you know gets into that high level strategic planning. Right. Do you do that as part of your forecast? You do that separate and a really small company. I think startup it's probably a lot of it's kind of lumped together a lot of times in the way it works. You know bigger companies, I think they're very. Can sometimes be very distinguished processes with corporate managing it and all those things. But in general I think your forecast for my opinion is 12, 18 months is probably typically about right. And I want to get to the question you put up there from Santiago for a minute. We'll go to this ones. There you go. Be part of a global network. We'll come back to that one. Santi. Yep, thank you. How do you integrate rolling forecasts made no number November or December with a budget planning for the new year? I see Carolina added some thoughts on that. I think Vernique did. Why don't we go with you first on this? Laurent, what's your thoughts?

I. I think that's kind of. It's a nice segue to discuss a little bit about the differences between budget and forecast. The way I see budget, I see budget as a strategic plan and the budget is more about what am I going to do within the next period. You know, traditionally the next period is one year but budget could be for a specific project motion or maybe for a couple of years. So I'm not necessarily a big fan of taking the forecast at the end of the year and say that that forecast will change or make last minute change in our budget because the budget should be somehow approved around October, November and that should have the high level plans for the next year. So unless something very radical was happening in the course of business, I would say the forecast of Q4 is literally to make sure that we are in alignment with our prediction to the year end if we need to and let our investors, shareholders, management knows that something is not really as expected. We need to raise a flag. But then again, like with any other forecast, it doesn't necessarily have to impact the budget unless it's radical. So budget should be the strategic plan, should be the strategic allocations of resources. And the forecast is just an indicator are we doing fine? And of course, if we're not doing fine, we need to revisit the budget.

And I'll, I'll add a thought here and then I'll go to you, Derek. I, I kind of take a little different approaches. There's. I do agree, 100. Your budget is your strategic for the next year. I think it makes a lot of sense to take whatever your last rolling forecast is for the budget and have that be your starting place from a system, from a data. But then you still need to have those discussions and make sure you build in the budget. So just from a practical standpoint, I've always seen, hey, let's just roll whatever that last forecast is, start there. Then you have your discussions and build everything in before you present to management, which often has the strategic, you need to have those conversations with them. So I think there's a mix of what Laurent's talking about here and also kind of the practical of how do you get all the data and how do you start it. And again, depends on system and excel. But I think your last forecast is in many ways a natural place to start the conversation. But you need to keep in mind the strategic. Because the forecast is always, what do we, as finance should be? What do we think is going to happen? Sometimes that's not what happens. When management says, hold it to budget or do this or do that, and you're like, but there's no chance that's ever going to happen. Who's ever been there? I know I have. Where you're like, keep the numbers the same and you're looking at it going, okay, I'll keep them. But there's no chance in this on this earth that that's happening. So that's what I'll say there. Derek, your take on this question, I.

Think I agree with both of you. Like the things that have already been.

Said.

I say from a process standpoint that my, what I do is take that last rolling forecast and that's the starting point in the budget. That's. That said, I think, where am I trying to go with this? I think that this is like also a difference between, like, what the forecast is and what the budget is. Kind of like Laurent was saying is we need to make sure that we're having those conversations that we may probably shouldn't be having those budget type conversations every single month because they need to operate and run the business and execute on the plan. And then the forecast is something that we should be doing with as little touch as possible from other departments, I think. And then the budget needs to be a much bigger process that's almost separate from the rolling forecast altogether. But in terms of where the starting point of the forecast is, the rolling forecast, I agree, should be where you start off. And that's also why I made the crying emoji on Santiago's comment is because this is why Q4 is just so hard for finance people as we have so many different things going on at once. But that's why we do what we do.

Yeah. So I, I have a question thoughts here between budget and forecast, should one be top down, bottom up, you know, driver based? Should be you be using different methods or how do you think of that between budget and forecast?

Kind of.

Any thoughts there? And we'll go with you first Derek.

Yeah, well first off I'm going to define what I think is top down and bottom up. Top down to me means. Well it can mean two things which makes even more confusing. Top down could mean you're going from a macro perspective and forecasting the business based on what you think your overall industry growth is or what the overall GDP growth is, for example. It can also mean top down from like a leadership perspective where leadership is saying here's what we got to do next year, you guys just got to figure out how to do that. That's also to me what a top down forecast is. And then bottoms up usually means that you're going to the very lowest levels of the business and you're forecasting out what what is possible from a capacity standpoint. So you go to your sales team and say hey, based on your hiring pipeline next year and the bud and the goals we have for ARR, like how are you going to hit those goals? So that's. I saw a comment from Carolina, I think I agree for the most part, forecast should be bottom up and budget should be top down. And so for what that the way I see that in practice is budget. We have like a very simple conversation with the CEO, cfo, maybe a few other department heads and we set high level goals for the next year and say we got to double our growth or that's true in my industry, but maybe not elsewhere, but double our growth, make sure our LTCAC is above 3, set some guardrails and then you go down to the rest of the business and you say, how are we going to make this possible? And you try to get those two plans to match as closely as possible. So the rolling forecast, I always keep it bottoms up, driver based. That's something that I can look at just how are we trending over the last few months? And let's carry those trends forward, see how close that gets us to our plan that we set beginning year. And then the annual budget process is a combination of those two where we start with a top down goals that we need from the board and from senior leadership. And then we go down to the business and say, how are we going to make this happen? And reconcile those two plans as closely as possible.

And what I found, I'll share my experience. Most of the time it was a combination of both with the rolling forecast and the budget. Because what would happen is I put my number, the general manager would look at it before they wanted the CO to see it and they'd be like, we got to de risk, we got to add some more in here. I can't go in with that low of a number. So. And some of the companies I worked at, it's like I want to keep my job, so we're going to figure it out. And I was like, all right, we'll put the number you want. So there ended up almost always being some kind of management discretion in that. But I agree in theory your rolling forecast should be as much as it can. What do you really think is going to happen with finance? Owning it and getting the necessary inputs to be comfortable with the number versus asking every single person in the business what's it going to be? Because they're all going to have their different motives. The idea is it's kind of a neutral view of what you think is really going to happen. Not budget, which is based on where, where should we go strategically, where do we think we need to accomplish? Lauren, your thoughts on that? And then I'm going to go to a question we have here.

I think we kind of, most of us kind of in agreement that budget is traditionally should be kind of top down and forecast is about the map. But they want to expand for a second. And this is a conversation that I had with dozens of customers and organizations. Some organization traditionally used to start budgeting as a bottom up. So they send those spreadsheets or you know, if you're thinking about modern world forms of their new EPM tools to the budget owners, right? And they said fill them up and what Happens is that they consolidating the data. The management is reviewing that information, said oh no, no, it's too low office sales, too many discounts, too many new headcounts. Right. And that whole process become to be a very back and forth conversation that hey, budget owners, you ask them to fill whatever they want so they put in the numbers and now management is pushing back. The whole filling out of this process is really bad and it makes the whole budget process to be more painful than it needs to be. Now if we start up down those budget owners, they should get a framework and sometimes they can negotiate a little bit here and there, sometimes they can move one line item right, left, that's okay. But at least when they starting their budgeting they already get that kind of management alignment. This is our expectations. And without that setting expectation, the whole budgeting process is going completely off rail. This is something that technology cannot solve. This is something that we can do only by creating the right processes in our XP and a FP and a ecosystem.

I, I appreciate that. So I want to go to a question we saw here and we'll start with you Laurent on it. So we had our a LinkedIn user. I'm not sure who that is, but thank you for joining us. In what ways can we integrate scenario planning into our rolling forecast to better anticipate and prepare for potential market disruptions or opportunities? So any thoughts on that? Of how you do a better job of rolling in scenarios to, to that process?

Yeah, absolutely. My initial answer might be surprising. Technically when you do forecast, you shouldn't be scenario planning. Right? That, that's, that's my approach because forecast is literally saying where are we, where are we going? And that should be kind of standard, traditional way of thinking how the business is moving right now. When we speak about scenario planning, that to me is something that is more similar to re budgeting and rethinking about what we can do. Because literally the idea is that if you say okay, I have optimistic and pessimistic view, that means that for each and every one of those conversations you will need to reallocate different resources of the organization. Let's say I like to be always positive. So let's say that your forecast is thinking about, let's we're getting more sales, we're getting more revenues than we anticipated. Right. That means you can hire more people or spend more on R D. Right. That's a re budgeting type of an exercise. So this is not a forecast. To me a forecast is literally saying are we Going on the pass? Yes. No, how much we're going to deviate for that. And if we see a big problem, that's where we do the scenario analysis. Only if we are kind of getting.

A little bit off track.

So how should we think about scenario planning throughout the year? Because if we have scenarios at the beginning, we know we all talk about how a point estimate is not sufficient, how should we be thinking about that, maybe making updates throughout the year. How does that process kind of fold into all of this in your view there?

Yeah, that's an excellent question. I think this is part of a management cadence that organization needs to decide. Usually I would say that's where you will do more like a qbrs, the quarterly Business review. And that's where you would like to say, okay, let's assume everything going as planned. Let's have all the big brains of the company sitting together and now thinking, can we do something else? Should we change anything? Right. And that's how you can think about scenarios. But I think if you are thinking about scenario planning every time you do forecast and combining all of that together, it makes the whole process very complicated and difficult. So I like to take big problems and you know, split them into small portions. And to me, scenario planning should be like isolated a little bit different than just the forecasting exercise.

And that makes a lot of sense to me. What you said, I like, I like the way you've laid that out. I haven't thought of it exactly that way, but it makes a lot of sense. Derek, what's your thoughts there on this?

I think, yeah, it's interesting. It was surprising to me to hear Laurent say that you don't scenario plan in your forecast because like to me that is, forecasting is what's, what are the range of outcomes that are possible. I always have different scenarios, usually a base case, an upside case and a downside case. But when it comes to rolling forecasts, it's a little bit more scientific. I'm not going to the business saying, what do you think is the worst thing that could happen? It's well, what is the worst that we've got like win rate for your sales team if it's usually 30%, but one month you had 15%, that becomes the downside case and you change. So on Your downside case, 15% win rate is going to bring down your, your total revenue. That's kind of how I think about scenario planning is just based on all of the things that we've seen in the past. And if you haven't don't have that much history. Maybe you make things up as what you think are the downside and upside case, but that's. I like to see a range of outcomes and then project out. Here's our revenue for the next 12 months. Here's our cash for the next 12 months. And. And show the range between those three scenarios of what. What could happen.

Only have one issue with what you said. You don't say make things up. You say, make educated guesses. Come on, Derek, you got to. You got to get the management lingo down. We're helping the younger generation here.

But thank you. I think, I think that semantics is very important because that means, Derek, that when I'm thinking about scenario planning and the way you are thinking about scenario planning, that's a little bit different. Right? Because you're saying to me, scenario planning is like, what type of accuracy I can bring the forecast in. And if I'm not sure, in one prediction, I might be giving two or three different predictions into my forecast. I'm thinking about the scenario more as something that you say, okay, we want to change something in the business and we want to simulate. Right. Like a different path that the business is taking. You're saying to me, scenario is even different level of accuracy or different cases of the same prediction without changing anything. It's just different.

Yeah.

And this is where you get into a little bit of sensitivity versus scenario. A little bit of what you're doing there, Derek, Even though it's best case, worst case is a little bit of a sensitivity in trying to figure out ranges. Where I think the distinction, if you think of what scenario planning technically, you know, if you want to use a definition, it should be. It's really about, okay, what does my company look like if there's a recession or if there's a government regulation change or different clear scenarios where you can map it out and then make a decision, should we switch to the scenario. But the reality is there's a blurring. There's times when scenario and sensitivity kind of get mixed together. So there's a lot of nuance in how we define this. As you guys are seeing here, just the three of us talking, we haven't aligned on what this looks like. And I'm going to guess if everybody else here would speak, they would. Might have a little different nuance. So the reality is, and I think this really highlights a good point that I want to share, and then we'll do one or two more questions here, let anyone else share any comments, and we'll Wrap up a little early today. I think this highlights there isn't one way to do this. There is no perfect way to forecast, to budget, to do rolling forecast, scenario sensitivity, you know, top down, bottom up. There's a reason why people different do it different ways. There's a reason why there's ideas like beyond budgeting. And some people say budgeting altogether sucks. And I'm going to use a totally, I use that term loosely but a different method. Right. You have to do what works for your company and there are guidelines and principles that are important and there are ideas that people need to have. But when you get into the nitty gritty, there are as many different ways to do this as there are forecasts out there. And it's not that one's right or one's wrong. There are some best practice and guides we should all be using. But you know, beyond that there's definitely a lot of room for discretion. So let's see if we got any other questions. We had one here coming from Vernique and I'll throw this one to you, Laurent first because I know when you're at jdox, there's definitely a lot of talk around this and use of kind of predictive analytics. So your take from your perspective having been in the the tool vendors and trying to provide this to customers of using AI and predictive analytics and forecasting.

Yeah. So let's, let's go for a second for commercials because we just completed the four meetings sessions about AI and plant bodies and we discuss about that topic. So you know, and we're probably going to do that session again and speak more deeply, deeply into the AI and the different tools and so on. So I think the first piece when we are talking about AI is the biggest question is like AI, what type of AI? And I think Veronik, you already mentioned here, like predictive analytics. My answer is absolutely yes. There are many organizations that are using and have been using AI for prediction. This is something that happened definitely starting maybe to accelerate over the past couple of months. But I've seen that for the past three to five years coming up mostly, mostly not as a full exercise but mostly for the recurring type of businesses now some of them using forecast just to estimate whatever oil price or whatever it's depending for them. Some software vendor I used to work with, they use that in order to predict their churn renewal rates and so on and that was giving excellent results. When I tested AI a couple of times, it was fairly quickly to get into 98% accuracy at least for months, over months. So not maybe for 12 months prediction, but with simple tools you can get nice accuracy for the next couple of quarters, 1, 2 quarters. As long as the business is fairly standard and as long as the forecasting is being done in high level, very little companies can really do accurate forecasting with not huge resources on a detailed level yet. So I haven't seen that working if you're really doing it by a customer. But if you do it by segment, by region, by months, that's something that companies are using and definitely helpful and pretty accurate.

Yeah. And I'll share two examples real quick here. I attended an AFP session that was done by Microsoft where they shared how they implemented AI. In their planning they use fin, which they've made open source to anyone their code and they used a bunch of different models. And how they rolled it out is they rolled it out to provide it as a resource to the business. They would review it and they could use it if they thought it was right or they could make adjustments or use their own plan. And as they tracked it they were finding the AI was better in most cases than the end user for revenue. They also use it for real estate. Now they don't use it in every area of the business, but they're continuing to roll it out. And I also know and I've interviewed was on a FPA today, a lady by the name of Cat Orova. She was in data science, a mathematics degree. She was working in product at Facebook and they were 10% off on their daily, they did a daily forecast for trying to understand things. This when they were first public and they were getting beat up by the market because FPA was really struggling to forecast. So they brought in the data science team and said let's try a different approach. She was the first data science team in finance and FPA and they got it to where they were within 2% every day on what their revenue would be using AI. So it's definitely been used now it's becoming more and more citizen data science and over time will be easier and easier for the masses to use. But you still have an need a certain level of data and different things for accuracy. Right. Less data you have, the smaller the company, the more difficult it may be. But we're definitely seeing it become easier and easier. So I would say a lot of companies are using it. I wouldn't say most companies by any means, but the data from FPNA Trend said companies that are using AI ML had a had 10% well actually they had 22% higher satisfaction in their forecast in the general population. They're better forecasts in general. That doesn't mean you don't need human judgment. You can't just rely on AI. But that, that's what I would add to that. And we'll go to Derek. Any thoughts on that? Derek?

Yeah. So my last company right before Circle, we had a model, a predictive model for forecasting duration of reservations. So I worked at a company that was like Airbnb but for storage. And so we had multi month reservations of storage that were going through our platform and that model was actually really good. It had an accuracy of 96% when back tested and it continued to be about that accurate going forward. So our recurring GMV revenue model we got a lot better once we started using that predictive model to forecast out revenue. And I think that's a really good use case for any company that has a recovery recurring nature to their business. So that's something I'm working with. Our data team at Circle now is building a model that does basically the same thing like how is this customer that we just acquired based on everything we know about them from their free trial, from what campaign they came from all those different things, how much revenue they're doing, use those different features to predict how they're going to retain the future. So those are some real life use cases that I've seen everyday at work. And it's just a way to, to make your models more predictive.

And I'll recommend an article, I think it's on equals website. I believe they published it. They tell the story in detail of Snowflake. I got an early copy of it. Snowflake was quite off on their forecast and their new CFO said we're not going public till we're more accurate. It ain't happening, so figure it out. And it was like a, a year, two year journey where they used a lot of data science and they completely had to redo things a couple times and a long journey and they got to where they were very accurate enough that the CFO was comfortable. And it's a really fascinating story of how they had to go about it. They hit the limit with their FPA team and they had to bring in some data science people and just kind of their journey to figure out what the right mix is and how to do it. And so if you get a chance, read that. And then I want to go to one question, then we're going to wrap up here or one comment. So I like this one. I think this is Aaron. He said increase stakeholder confidence confidence explanation showing that you have considered multiple future scenarios can increase stakeholder confidence in your planning processes and reassure them that you're well prepared for various outcomes. Agree. You know, being able to do that in your quarterly to show you strategically thought about if a recession comes, we're prepared if there's a boom, if there's a black swan. Right. You want to have confidence in management and knowing they thought about different things brings confidence. But I'll add one thing kind of as you mentioned this that made me think of in stakeholder confidence there's a guy by the name and I'll laugh when I say this. Jeff Epstein. Not Jeffrey Epstein. He's a part of Besmere Venture Partners. He used to be the C. CFO of Oracle. And he talks about how it's a different budget and a different level of confidence for your external, for your public versus your internal and how you think about it. And he called the article and if you assert, if you Google it, you'll find it it was how to build a Goldilocks budget. That's just right. He talks about the different mentalities like Ellie and Musk always throws out some huge targets and never comes close and others are. He gives his view of how to think about each of them. Your sales forecast, you know, those operational pieces, your public, your budget, each of them kind of what his preference is on accuracy. And it's. It's a really good read because it just makes you think how. How different. How many different opinions there are out there and how to think about all this and that there's the strategic element to. To budgeting and forecasting. So if you get a chance, I would encourage that. We're gonna go here and just give our panelists an opportunity to add any final words before we conclude. So we'll go with you Laurent first and then we'll give our young and the last word.

Yeah, I think we covered many interesting topic and I hope to keep this conversation going going in the community. Maybe one piece we didn't cover and we just started to raise that is the importance of forecast and accurate forecast for investors. We are thinking about that mostly from an operational perspective. Okay. What are we doing if we have more or less than what we planned but definitely with investors that the trust of the company and. And if our forecast is accurate we get more confidence from investors whether that's a private company, VCP held and definitely a public company if you can. And that's the reason why Snowflakes were CFO was so ancient about providing accurate forecast. So that's maybe another angle to speak about on our next conversation about forecast.

Derek?

Yeah, I don't know if I have much more to add. I think that it's helpful to keep it in the sense of the broader FPA cycle at your business. Why are we forecasting? It's not always an accuracy game. In some senses it is when you're giving numbers to the street type of thing. But within the business, it's about just making sure we're steering the business in the right direction and using the forecast as a tool to do that, using it as like the rudder to say if we, if we move this lever this way, what direction are we going to end up in? Where? What's our ultimate destination if we continue to perform like this? And so keeping it high level as a, in terms of results and make sure that we're, we're charting the business's course to a place that we want to end up as a company is probably the most important part of, of any forecast or any FPA process.

Thank you. I appreciate that. And that really kind of brings it in to perspective, what you said there about just the importance of helping move the business forward than being accurate. So thank you for joining us again. You know, please come over and check out Plan Buddies. We'd love to have you join the community. We're about 75 strong or so right now and always looking for great voices to carry these conversations forward. And feel free to reach out to any of us. If you have any questions, we'll respond to you. You can find us on LinkedIn, you can find us in the Plan Buddies community. So thank you for joining us today.

Thank you.