4 techniques to take the pain out of forecasting in healthcare

In this blog, we will explore four techniques that demonstrate the power of modern tools like FP&A in simplifying the user experience of forecasting, so you can refocus on the life-changing work done in the healthcare industry.

Demand forecasting in healthcare

Many factors can make forecasting troublesome and complex, such as:

• Peaks and troughs in resource requirements 
• New equipment demands,
• Complex funding and lease reporting 
• Needing to update your outdated properties, 
• The cost of staff (retained vs. agency) 
• Huge demand and changing costs for consumables

The myriad of growing challenges facing the sector today make forecasting tough, and when you add legacy systems into the mix, like Excel, the task of allocating resources and developing financial strategies becomes insurmountable. 

The good news is that modern FP&A tools, with the support of and integrated data, power better decision-making and timely analytics. Integrating modern FP&A techniques could boost forecast accuracy and your decision impact, let’s take a look.

1. Rolling Forecasts

A significant evolution in the FP&A planning process is rolling forecasts. A rolling forecast is a tool FP&A teams can use to make planning a continuous process that lives and breathes with the organization. 

Where static plans used to last for a calendar year, rolling forecasts continue into the next period naturally, with FP&A setting the duration for usually rolling 12-month forecasts or quarter-by-quarter or month-by-month. 

A rolling forecast lets you see trends and adapt plans to your external environment. This can allow your financial teams to work more productively, by developing strategies to deal with disruptive factors as they occur, rather than wasting time developing a budget or plan that is abandoned quickly.

To do this, the most critical step for a rolling forecast system is setting your forecast period length. The longer the period, the less accurate the forecast is likely to be. However, though more accurate, shorter forecasting periods require significantly more input and resources to be updated regularly. 

Click to read Unit4 ERP Excellence beyond Excel (Gated) 

2. Driver-based planning

Traditionally, financial forecasts were based on historical numbers, and organizations then added a growth target percentage from top-down strategic guidance. The problem is, this misses the ‘story behind the numbers.’

Yes, your financial statement reflects the interplay of a multitude of factors that affect your finances. The issue is, that for accurate forecasting, you need more than just ‘the numbers.’ It’s also critical to identify the key drivers of your organization.

Every organization needs to discover what most influences the business and drives performance, especially in changing times.  the right financial planning and analysis (FP&A) tools can help you to identify your financial value drivers and define how they relate to each other.

When specific drivers are included within financial plans you can get a better understanding of the factors that affect demand and performance, helping you better allocate resources and plan.

3. Scenario planning

The real-world funding constraints the healthcare sector faces today make planning a complex exercise. This is made worse by how rapidly these changes can happen, meaning not only are static long-range budgets almost useless, but even shorter-period forecasting with reasonable certainty is also becoming more challenging. 

To scenario plan effectively, you’ll need more advanced tools than many FP&A teams in the healthcare sector are currently using. Relying on spreadsheets, email, and manual data entry is no longer fit for purpose when faced with the current speed of change and increased need to re-forecast. 

Working in these outdated ways is not just slow but also impedes your data’s accuracy by relying on data siloes. Effective scenario planning is only possible with tools that rely on real-time data collection which can project multiple scenarios using different trends and event modeling instead of simply relying on people’s best guesses.

East of England Ambulance Service Accelerates Reconciliation with Unit4 FP&A from Unit4 Video on Vimeo.

4. Zero-based budgeting

One of the most common errors a budgeting process faces is the anchoring effect. This involves using a historical number as an ‘anchor’ to build your forecasts and budgets. But doing this may have severe implications on what you predict. 

For example, when allocating cost budgets to different organizational units, the most critical factor is their potential to deliver future results, not their past performance.

Without ZBB, you may end up investing excessively in areas of your organization that have already reached saturation - it may also mean you may be underinvesting in areas that deliver greater value. ZBB means every area of your organization justifies its budget allocation, which returns to zero with every new budgeting period. 

Traditionally, most organizations use last year’s figures to justify this year’s. In contrast, the negotiation would be for a percentage increase or decrease in budget compared to the previous period.  Therefore, a zero-based budget lets you allocate resources more optimally and frequently, based on your organization’s needs at that moment.

How can Unit4 make forecasting simpler?

With Unit4 FP&A we provide a single platform for an improved user experience when forecasting and developing agile financial strategies. 78% of FP&A professional's plan to improve technology and data skills over the next year, according to a 2024 AFP benchmarking survey, and Unit4 FP&A is the perfect way to achieve this.

We are dedicated to providing the latest innovations to the healthcare industry, which is evident in our many customer stories, such as the East of England Ambulance service: