PracticeAccounting FirmsMost companies understate forecasts

Most companies understate forecasts

A newly released KPMG report reveals most companies understate their forecasts as errors can drive the share price down by 6%

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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