Between tariff pressures, interest rate uncertainty, shifting consumer behavior, and other macroeconomic upheavals, today’s CFOs are navigating a highly volatile operating environment. At the same time, these finance leaders increasingly are being tasked with making forward-looking strategic decisions about capital, hiring, pricing, and other critical elements of their business.
The problem is, many are using forecasts built almost entirely on historical, internal data—a perspective that is, by definition, limited and retrospective. You’re told where you’ve been, not where you’re going, and in a planning environment shaped by external events, this approach risks making high-stakes decisions without the complete picture.
And as the operating environment continually grows more volatile and unpredictable, the danger of relying on that limited view increases accordingly.
CFO’s need foresight more than ever
The role of corporate CFO is changing, evolving beyond the financial monitoring and reporting responsibilities that once were the position’s core functions, into a much more strategic mandate, notes Simone Ferrari, Product Manager – FP&A Solutions at Board, a provider of enterprise financial and operational planning software.
“CFOs are nowadays being asked to be not only the ones who can explain the financial results, but who can also anticipate what is coming next,” says Ferrari.
Legacy tools, Ferrari notes, tend to be “quite deterministic and quite linear,” and struggle to provide the much-needed foresight. Given the fast-changing dynamics of today’s business climate, any budget or forecast based on limited historical data is almost certain to be out of date as soon as it’s delivered.
That, in turn, means every downstream decision informed by those reports, such as how much and where to invest, how aggressively to hire, and where to set prices, is based on past conditions that often are quite different from current realities, leaving companies constantly trying—and failing—to catch up to market realities.
Why internal data falls short
The core problem with legacy FP&A is that internal data, by definition, only captures what has already happened inside the organization. It says nothing about the forces actually shaping the business from the outside at the present moment.
“A lot of the most important data to a business doesn’t come from inside the company,” Ferrari explains. “It comes from somewhere else outside the organization, and the challenge is both identifying and integrating that data.”
On the revenue side, examples of critical external data include signals tied to consumer sentiment, customer activity, disposable income, and even shifting government policy—none of which can be derived from a company's internal systems. On the cost side, meanwhile, factors such as tariffs, commodity prices, raw material costs, and fuel prices have become increasingly important for companies to monitor in as close to real-time as possible.
But the real danger of FP&A based on outdated or incomplete views of these outside conditions isn't just imprecision, Ferrari observes; it’s a false confidence in plans that look authoritative but are based on limited, outdated, and/or irrelevant data.
"The biggest issue is how much confidence a company may have in a plan when all of the internal math looks right, but it isn’t actually a reliable indicator of what’s really happening,” Ferrari cautions.
The good news for CFOs seeking to avoid these pitfalls is that a modernized FP&A approach enables access to the full scope of the data companies actually need, while it’s still current enough to be a useful—and reliable—strategic guide.
The path to better data
For financial leaders seeking to improve FP&A by optimizing data use, Ferrari recommends a practical sequence of steps:
- Move from calendar-driven to event-driven planning. Instead of treating planning as a periodic assessment based on what occurred during the past quarter, organizations should react to events that warrant a strategic reassessment — whether within the company or outside of it.
"Many of the events that should reshape a plan are external. If you can only react to them when the quarter closes, you're already behind," Ferrari notes. "The real value is being able to recognize those signals as they emerge and adjust while it still makes a difference."
- Unify your data view. Bring finance, supply chain, and operations into a single view, so any data that's ingested can be structured coherently rather than scattered across systems.
- Separate signal from noise. Parse the wide stream of available external data to identify what actually matters to your business. Board's Signals platform, for instance, offers more than 5 million external data points that can be correlated against a company's own metrics. An AI layer does the first pass to narrow the field, then Board's team of economists works with clients to identify which indicators are most important to their business, and how best to integrate that data into the planning cycle.
- Start narrow. For a CFO who knows modernization is necessary but isn't sure where to begin, Ferrari's advice is to identify a key cost or revenue line to address first, then map the external factors most important to driving improvement in that area. New models should be benchmarked against legacy forecasts and fine-tuned over several cycles.
"It may take a few iterations before the model is fine-tuned," Ferrari notes. "But the model will improve as the FP&A strategy matures and finance leaders begin to understand it more and more."
Want to learn more?
In a business environment where rapid change is the only constant, a modernized approach to data gives finance leaders a clearer, more current view of the forces that are actually shaping their business. With this new approach, they can plan with more confidence, adjust quickly when conditions shift, and better fulfill their increasingly future-focused strategic role.
To learn more about arming your finance team with the data they need to plan for what's next instead of what’s already past, contact Board today.
