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Posted by & filed under Budgeting and Forecasting, Financial Planning.

Read more on "5 Essential Questions To Ask When Choosing A Budgeting and Forecasting Solution" »


Choosing new software to handle your company’s budgeting and forecasting activities is not an easy task. Between finding something to suit your unique needs and wading through the multitude of products available, it can be overwhelming, to say the least.  But if you know in advance which questions to ask, the process becomes much more streamlined – and produces much better results.

The following five questions should be addressed by any CFO looking into new budgeting solutions, in order to ensure the right fit.

1. What is the rationale behind this purchase?

The most basic question needing to be answered is why you are buying the budgeting software in the first place. Are you looking for greater efficiency? A product that gives you more insight into your finances? Once you’ve determined the reason for your purchase, you can narrow the field down to products that will provide exactly what you need.

2. What is the business case for this expenditure?

Now that you have the main reason for the purchase set down, take a step back and look at other strategic objectives of this purchase. What needs have senior executives expressed that could be addressed with this new budgeting and forecasting solution? What about other departments? Which ongoing performance improvements could be achieved by the new software? Gathering this additional data will also assist in your search.

3. Which products will fit into our existing IT set-up? 

This may be one of the most important considerations of all. If your existing infrastructure won’t support your choice of software, then it will do you no good. And if a certain forecasting product presents a conflict with current vendors, you may have to work that out before implementing anything new. Check and double check that everything will mesh seamlessly with your company’s system.

4. What will the TOTAL cost be?

Is every functionality you need included in one solution, or will you have to buy multiple products in order to get the right fit? Will your team need training in order to use the new budgeting software, or is it intuitive? Don’t look at the simple price tag alone – consider the total cost of implementation as well as the cost over time.

5.  Are there customer reviews available from companies like mine?

If other organizations in your industry have used a certain budgeting and forecasting solution and found it helpful, that says a lot about whether it will also be appropriate for your needs. Check for testimonials, reviews, and even ask for references you can approach to ask specific questions.

After asking all five of these questions, you can feel secure that your choice of budgeting and forecasting software is the right fit for your needs.

Here at TGO Consulting, we want to help you find the budgeting and forecasting software that suits your unique needs the best. We offer different options to choose from depending on various factors such as company size and needs. Contact us today, and we can review the above questions with you, as well as any others you may have.   

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Read more on "Where Did That Number Come From? A Guide To Driver Based Budgeting" »


It’s the question dreaded by just about anyone heading into a budget review meeting – Where did that number come from? With so much of forecasting consisting of, at best, educated estimates, and at worst, guesswork, sometimes that question can be just about impossible to answer. Wouldn’t it be nice if there was a clear cut, mathematical formula for each figure input into your spreadsheet, that would give you something to point to when asked that dreaded question?

That’s exactly what driver based budgeting gives you.

Driver based budgeting allows CFOs to calculate budget and forecast numbers using custom mathematical formulas created by real data from their company’s past sales numbers.

So what are drivers, and how do they work their magic? We’re glad you asked!

Drivers are basically any aspect of operations that can be measured in units. This can include units of product, customers, transactions, deliveries, installations, etc. These numbers give an overview of the activity levels that drive revenue, head counts, expenses, and capital for your business.

Now, these activity drivers have relationships with each other that can be described using a conversion rate.  For example, if your company data shows that 85% of customers who buy a printer also buy ink, then 85% is the conversion rate connecting those drivers.

Using the number of driver units and the conversion rate, the forecasted amount to enter into your budget can be easily calculated with the following formula: [Units of Printers Sold] multiplied by 85% = [Amount of Ink Sold]. 

Not only does this method of coming up with forecasting numbers give CFOs an objective measure to point to when asked where any given number came from, it also brings the finance department into much closer contact with operations, and thus helps identify which drivers are financially important, a bonus not included in other forecasting methods. This in turn allows management to make crucial operational decisions based on solid financial information.  

Driver based budgeting also gives companies new insight into any deviations from the forecast. If numbers don’t turn out as planned, it’s a simple matter of mathematics to look back and see what changed – the number of driver units, the conversion rate, or both. This knowledge can then support the decision-making process, as well.

At TGO Consulting, we offer budgeting and forecasting solutions that assist in the development of a driver based budgeting system. Our True Sky product facilitates driver based budgeting that allows your organization to capture this critical data that is so often overlooked – but which can have a material effect on your bottom line or margins. Not to mention the fact that it will help you wow the executives at your next budget review meeting!

Contact TGO Consulting today for more information on how we can help your company begin to make those vital connections between finance and operations, and make smarter, more informed business decisions based on objective measures and educated forecasts.  

Posted by & filed under Budgeting and Forecasting, Financial Planning.

Read more on "4 Techniques For Budget Forecasting" »


In business, knowledge is power. The keys to a successful enterprise rest on the ability to stay agile, to make the best decisions in a timely manner.

Being able to forecast overall income and expense, net profit or loss, overhead costs or the performance of individual functions is a crucial of strategic management. But the ability to forecast is determined by how your budget is set up. You can forecast for an entire year or use real-time data to project results. By creating different budgets, or different reports within a master budget, you can effectively forecast the performance of your business.

1. Create A Master Budget. By far the easiest technique, a master budget is an ideal way to forecast the performance of a business. Based on recent performance, this static document projects a snapshot of how you envision your business will perform over the course of the coming fiscal year.

Performance is projected based upon income and expense data from one or more previous years as well as trends and market knowledge. This forecast is then taken to managers who discuss the anticipated performance of products or services, changes in the marketplace and other factors that might cause changes in your company’s results compared with the previous year. Forecast your final budget using your recent performance numbers and agreed-upon projections.

2. Make real-time projections. You can create an additional column of information in your master budget that projects your annual performance using data as it occurs. This technique can improve the accuracy of your forecasts. For example, by using your first three months’ sales figures, you might be able to project more accurately your year-end totals – more so than a static master budget does.
As you enter data into your master budget, divide the "Total" column results by the number of months that have passed to get your average monthly income and expenses. Multiply the numbers in this column by 12 to project where you will end the year if these numbers continue at their current levels.

3. Make Overhead Projections. Knowing precise per-unit production costs is critical to forecasting profit. Overhead costs are factored in as the costs of selling these units.

If you have $1 million worth of direct expenses to make a product, and it costs $2 million to run your company, your actual cost to sell each unit will be $3 each. Keeping track of overhead will help you project your margins and profits if you adjust your production numbers.

Use your master budget to identify all overhead costs, such as rent, insurance, utilities, phones, office staff and marketing to determine the company’s overhead costs. Divide this total by the number of units you produce to determine your overhead costs per unit.

4. Create multiple scenarios. You can use your master budget to create scenarios to project how different levels of sales and different prices will affect your bottom line.

Create three scenarios: In addition to the initial annual projections you and your team make based on your recent history and anticipated market conditions, create two more budgets that show a lower amount of sales and a higher amount of sales. This will let you project the impact on your business to see where you can make adjustments. Create two more budgets that forecast your performance at price points higher and lower than your current prices. Adjust your sales numbers to reflect the impact your two prices changes will likely have. This will help you project sales, profits and margin changes. If your sales rise in response to lower prices, your profit per unit will increase as your overhead cost per unit goes down.

Software and applications can greatly improve the speed and efficiency of budget forecasting. TGO Consulting offers solutions tailored to meet your unique business needs. Contact us today and learn how you can optimize your business.

Posted by & filed under Budgeting and Forecasting, Financial Planning.

Read more on "Annual Budgets vs. Rolling Forecasts: Which Is Right For Your Business?" »


In any business, there’s always some tension between the way something’s always been done, and any innovative, new ideas that could precipitate a sea of change. And in the realm of finance, this is especially true. Why tinker with an aspect of business so vital, if everything seems to be hunky-dory?  Finance provides the basis for any organization’s survival, so concerns about any changes in methodology are understandable.

However, as today’s culture of ‘disruptive’ thinking begins to permeate every corner of business, approaches to processes such as budgeting and forecasting are also evolving. Being agile and adaptable is now the name of the game, and if a company’s finances can’t keep up with ever-changing scenarios, the outlook is grim.

That,s why many businesses are rethinking their use of static annual budgets in favor of the more flexible rolling forecast. Which is right for your organization? Let’s explore the differences between the two.

Resources

Most everyone is familiar with the intensive work associated with putting together an annual budget each year. Well in advance of the new financial period, man hour upon man hour is put into its preparation – research, data evaluation and input, review. Business resources needed elsewhere are tied up in this one process for what seems like ages, as everything must be completed and set in stone before the new fiscal year begins.

With a rolling forecast, on the other hand, this process is ongoing throughout the entire year. Rather than being tackled in one fell swoop, and then left alone for the rest of the year, rolling forecasts see tweaks and changes made each month or quarter, based on the most current trends.  No huge investment of resources is necessary all at one time – instead, the workload is spread out over the entire 12 months.

Flexibility

With an annual budget, research into past and current trends determines the plan for the entire upcoming fiscal year. Many times, however, this data is already out of date by only a few months into the new year. But because the annual budget is static, changes are not made until the following year.

Rolling forecasting allows businesses to not only stay up with current trends as they update their data each month, but also to quickly and easily adapt to changing market conditions such as new competitors, cost fluctuations, or even changes in the economy.

Outlook

Annual budgets make a forecast for the next 12 months, and count down to zero as they go. Anyone wishing to look beyond the remaining months in the budget must simply wait until the next year’s budget is put together.

When a rolling forecast is put in place, however, there is always a 12-month forecast available – as each month or quarter passes and falls off the plan, another month or quarter is simply added to the end. In this way, there is always up-to-date, long-term data accessible when important decisions need to be made. 

Rolling forecasts make your organization’s financial plan into a living, breathing organism that can pivot easily as needed and adapt to changing conditions whenever necessary.  And at TGO Consulting, we offer solutions that can promote a shift within your business from once a year budgeting to rolling forecasts, in order to provide more accurate and up-to-date business decision making information for your company.

Our True Sky software has been hailed by Brian Armstrong, former CFO at Microsoft Canada, as an elegant solution to this common business issue: “The elegance of the True Sky product is that it harnesses the power of Microsoft Excel and SQL Server to deliver a solid and flexible solution for planning, forecasting and budgeting.”

To learn more about True Sky and all our budgeting and forecasting solutions, contact TGO Consulting today!

Posted by & filed under Budgeting and Forecasting, Financial Planning.

Read more on "6 Ways To Improve Sales Forecasting" »


While sales forecasting is a solid element of business best practices, the truth often is that they are inexact. So how can you maintain critical management strategy and at the same time improve you forecasting?

Know Where To Look
The key to improving sales forecasting is to know in what direction your forecasts are wrong. Understanding these weak spots allows you to create a picture of how your business is performing.

But there is more to forecasting than mere accuracy. The utility of forecasts can be assessed in other ways – look at them from the standpoint of how well they break down into meaningful assumptions than can examine at a later time.

Fortunately, there are ways to avoid turning your forecasting into a mixture of chance and luck. Here are six ways you can test your sales forecasts.

1. There’s no one set of numbers. A common misconception many businesses have about forecasting is that there is one set of numbers that reflects the reality of that business. The truth is that a business needs multiple forecasts in order to comprehend the needs of departments.

Product management will have different needs from a sales team, and these in turn will differ from what revenue requires. Senior management must then gather these forecasts together into a cohesive whole. Keeping this picture accurate is a matter of ensuring that forecasts have been vetted from all perspectives.

2.Be realistic. There’s no magic test that will ensure you can track all the details of every sale. Because conditions change, developing a flexible process that can be reevaluated, adapted, and managed is critical.

3.There’s more to forecasting than averages. One of the biggest mistakes in forecasting is looking at past sales figures and evolving an average based upon them. There are other important areas that need to be considered.

Because sales forecasts need to be updated on a regular basis, merely taking an average of past performance produces an imperfect picture to rest critical decisions on. Managers should understand the sales system, product delivery, and customer history to be able to assess the accuracy of forecasts.

4.Take time to monitor. For forecasts to be useful, they must be constantly and consistently monitored. Making time for managers periodically to look at, plan, and compare actual results strengthens the broader decision making process of your business.

5.Be consistent in modeling. There is no one-size-fits-all model for forecasting. There are a variety of ways of making predictions, but the key is to be consistent in using the same model – the format then becomes standardized and makes the review process easier each year.

6.Keep it simple. Forecasting needn’t be a complex process involving advanced math and projections. Easy to use software and applications are available to aid in making forecasts. These solutions provide an audit trail, a history of the forecast, and the ability to align the data with customer relations management.

TGO Consulting has the tools your business needs to stay agile and grow. We custom fit solutions to match your company’s unique needs and provide the support to ensure they function smoothly in every facet of your business activity. Contact us today and learn how TGO can make doing business better.

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