Why Forecast?
We know you can’t see into the future (no one has a crystal ball!); however, sales forecasting is an incredibly valuable practice that can help your utility effectively plan for your community’s upcoming needs.
Forecasting benefits include:
Allowing your utility to plan more effectively for daily and monthly operations. You’ll know how much you’ll need for labor, chemicals, and other resources at various points throughout the year.
Using your sales forecast to project your cash flow. Estimating cash flow affords utilities the chance to recognize potential shortfalls and take measures to address them before they happen. You’ll also avoid emergency borrowing (and the political fallout that often follows).
Gaining crucial insight into planning for your long-term infrastructure needs. By forecasting as accurately as possible, you can determine how much infrastructure you need and when you’ll need it. This way, you can sidestep overbuilding and overspending.
Simplifying your interactions with the Public Service Commission (PSC). The PSC expects rigorous forecasting to justify water rate increases as well as costly capital projects. By having one already prepared, you can forestall many questions and more work down the road.
3 Steps to an Accurate Forecast
The first and most important step: start by defining your goals. What do you hope to accomplish with this forecast? A key part of defining your goals involves defining the timeframe for the forecast. For example, you could devise a goal of planning for your infrastructure needs so that you can determine your borrowing needs for the next twenty years.
Examine your available data. Your data will decide what you can do for your analysis. For instance, if you have historical sales data going back thirty years, you can analyze this data set to see what trends emerge. You can then apply these trends to the twenty-year forecast you’re building.
Assess the resources available to help build the forecast. If you have the in-house expertise and the employee time available, you can build the forecast yourself. How much time and expertise you have at your disposal will determine the level of detail and versatility of the forecasting model you use.
Now What?
For a forecast to be valuable, it needs to inform your utility’s decision making process. Knowing what the future holds can’t help anyone if it’s not used to make smarter choices. As the billionaire investor Warren Buffet once said, “Predicting rain doesn’t count. Building arks does.” Use your forecast to build some arks!
To learn more about what forecasting can do for your utility, or for help with the forecasting process, please contact an expert at R/M today.
