A new product line budget may be created by referencing an older, similar product line historical actuals

Description

Use the history of a like product or service to forecast a new product or service using predictive or other methods. This is a crucial feature for companies that launch new products on a regular basis.

Example Use Case

Scenario: A mobile phone case company has recently decided to launch a new case for the iPhone 75, which is similar to the case for the iPhone 74. For this process, the financial team aims to plan the budget based on the older product's historical data.

Solution: With the aid of CPM software, the team can quickly pull up the financial details of the older iPhone 74 case, including production costs, sales revenues, and overheads. These details are used to automatically populate the budget for the iPhone 75 case. This type of historical data referencing allows for efficient planning and budgeting, providing a strong foundation for the financial forecast of the new product line.

Considerations

This functionality can work in a number of ways, some easier than others. This depends entirely on the depth of the forecast. Are you only looking to leverage sales information from a like product starting from a specific date, or are you looking to capture all related data? Or will the sales data activate drivers for things like CoGS?

In the example above, forecasting the iPhone 75 would require using iPhone 74 data from the date of launch, not current data. There is likely a spike in sales early on. The system would have to allow the user to say something to the effect of “forecast iPhone 75 starting May 1, 2050 using iPhone 74 data that starts May 1, 2048”.

Questions to Ask a Vendor

• Adding New Products: When adding a new product are we able to populate the forecast with existing like information?
• Modifiers: Can we add new products using historical information, but modify it such as increasing by 5%?
• Administration: Will finance be able to do this themselves, or is this a custom process done by a consultant?