Most companies understate forecasts

by AccountancyAge.com

22 Nov 2007

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Only one in five companies produce reliable forecasts, and investors respond to forecasting errors by shaving 6% off companies' share price, according to the latest global study commissioned from the Economist Intelligence Unit's survey by KPMG International.

Conversely, firms releasing forecasts which were accurate within 5% had their share price rose by about 46% over the past three years, compared with 34% of others. On average, company projections had been out by 13% over the past three years.

‘Those companies that do meet forecasting targets are high-performing companies able to make better decisions about their future,’ John Herhalt, practice leader, operations improvement, KPMG advisory services, told the Financial Post in Canada.

The technology the companies use worries KPMG as one-third of respondents find the technology to produce their outlooks a ‘notable impediment’, the Financial Post in Canada reports. ‘Nearly all organisations still use spreadsheets for some parts of the process,’ the report noted. ‘More worryingly, however, 40% of them rely solely on spreadsheets to produce the forecast.’

Further reading:

How to unearth buried treasures

UK firms lagging behind on sustainability

Read story in the Financial Post

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