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2 Ways to Ensure Your Forecasting Data is High Quality

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You've probably heard the saying…

Garbage In = Garbage Out (GIGO)  

But what does this have to do with forecasting?

Well if your forecasts are built on garbage data - how can you and your clients expect to trust what they're telling you?

That's why getting high-quality data is essential for advisors like yourself that are wanting to create forecasts (or offer any additional services) for your clients.

First things first, what do we mean by ‘High Quality Data’.

Two things really, high quality data is:

1.  Accurately coded
2. Consistently coded

Two very similar ideas, yet different, and equally as important.

1. Accurately Coded Bookkeeping Data

Accurately Coded Data means data that has been verified against source documents whether by you or your client. The importance is that you have some sort of quality assurance process in place as part of the bookkeeping process. 

When dealing with financial data it can be easy to take it at face value, so if you're not the one doing the data entry a lot of inaccuracies can persist. Not verifying this data can skew historical results, which then skews your forecasts as they’re often based on historical estimates.

Inaccuracies can be as simple as having the wrong date or amount (oops), but they can also be something as fundamental as expensing a purchase when it should really have been capitalized.

Ultimately inaccuracies prevent you from creating useful forecasts.

2. Consistently Coded Bookkeeping Data

Consistently Coded Data is related to accuracy in that, the data needs to be coded accurately the exact same way every time in your accounting systems - always. (Yes really, accuracy and consistency are your new B.F.Fs). If not, again, it's going to skew your historical data and, you guessed it, your forecasts.

Remember trends are your friend, and the more accurate and consistent the data in your accounting system the more likely you spot trends and create the best forecasts for your client.

So, unless your client happens to be Oscar the Grouch, remember to avoid GIGO (Garbage In, Garbage Out) when forecasting. The key to this is ensuring your data is accurately and consistently coded.

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