The quality of revenue forecasts and sales pipeline estimates is failing British businesses, according to research carried out among UK company directors.
Four out of every five executives polled feel they cannot trust the sales forecasts they are given, and will apply a discount factor of between 5% and 90% to the numbers they are given.
The cash implications of this level of potential inaccuracy are significant, the experts behind the survey insist, because half of directors believe they do not have the cash resources to survive a shortfall in revenue of just 10% for three consecutive months.
A report on the research has just been published by financial software supplier Visual Insight, in partnership with the FD Centre, Haywards, Liverpool Ventures and Strategic Software Partners.
One conclusion of the analysis is that cash management could be becoming unnecessarily challenging for some businesses, because of inadequate levels of software support.
Businesses face the danger of running out of cash simply because they rely on inaccurate data, the survey outcome suggests, and so are unable to make informed decisions about cash planning, revenue, and short-term investment levels.
The backers of the research maintain that the gap between promised and real income provides a real threat to business, and on several levels.
“In an economy starved of liquidity, operating on best guesses, when the safety blanket of a growing economy has been removed, could be deemed irresponsible by shareholders and raises serious implications for director compliance” John Lowry of Visual Insight, said.
Visual Insight itself sells software that takes historical information about a company’s sales performance and compares it with previous forecasts to create a more accurate long-term projection of the sales pipeline.
The poll was carried out online in the last quarter of 2008 and drew responses from 111 directors, 47% of which were CEOs.