The Forecasting module is an optional module, that allows users to view the earnings that DealTrack is forecasting for their deals, and modify the mechanism by which they are forecast.
To view a deal’s forecast, select the deal you want and click View Forecast. DealTrack forecasts the total spend of the deal and then calculates the forecast earnings based on that spend.
Forecasts are always in a deal context and a typical deal might be configured with a forecasting period (the reporting period) of a year and monthly phasing periods. This would allow the seasonality to be modelled monthly and reported on yearly.
DealTrack will initially forecast based on the default phasing, which is a default seasonality profile that can be uploaded to the system for each supplier or client division.
Types of forecasts
For each deal there are three types of forecasts:
- Initial – The baseline turnover for the deal, spread according to the default phasing for that deal;
- Current – The current forecast;
- Previous – The forecast that was calculated immediately before the most recent phasing period ended.
This forecast looks at what the baseline turnover is for the deal and takes that as the total turnover you will spend in the deal. It will then spread the turnover across the deal according to the default phasing for that deal.
- If you do default phasing at the trading partner level, that will be the default phasing for trading partner.
- If you do default phasing at client division level, then a deal may be made up of a blend of client divisions so then it will be a weighted average of the defaults for the client divisions. This is worked out by looking at baseline turnover for a deal and seeing what the blend of client divisions looks like.
This forecast is the one currently being used, if you are using the manual forecast method. If you are using automatic forecasting, then the current forecast is the latest automatic forecast.
At the end of every phasing period, the phasing period is locked, and the actuals get populated. A snapshot is taken immediately before the locking of the phasing period and this becomes the previous forecast. This allows you to see how the forecast has changed by comparing the current and previous forecasts.
Ways to calculate forecasts
There are 3 different ways a forecast can be calculated. DealTrack will calculate a forecast either by:
- Automatic Forecasting;
- Preserve total;
- Preserve phase spending.
DealTrack can be configured to default to the forecasting method that most commonly fits your needs.
When automatic forecasting is selected, the forecast cannot be edited. As with all forecast methods, the initial forecasts are calculated using the baseline turnover apportioned over the default phasing values uploaded for the supplier.
At month end, DealTrack calculates a spend per phasing unit and uses that to calculate the deal total spend. The deal total minus the actual spends is apportioned over the future months according to their phasing values. So, if October came in lower than expected, e.g. the total actuals for the deal are 1% lower than previously forecasted, then November and December forecasts will be adjusted down by 1%.
Preserve phase spending
This calculation method allows the user to directly edit the forecast spend for a future month. It then calculates the total spend as the sum of the actual and future months.
The user should not try to change the total forecast spend as this won’t have any effect.
At the end of the month, this calculation method keeps the future months the same but adjusts the total spend based on the actual turnover which has been realised. E.g. if October turnover was lower than the forecasted amount, the forecasted total would be reduced accordingly but future months forecasts would be unchanged.
When the preserve total method is selected, the user can change the total spend for the deal. The difference between the new total spend and the previous total spend is then apportioned over the future months based on the phasing for those months.
The user can also change the phasing for the future months by entering values for these months. DealTrack then apportions the total spend over these inputted values.
When a month is finished, this calculation method keeps the total spend the same and adjusts the future months to account for the actuals which have now been realised. E.g. if October turnover was higher than the forecasted amount then November and December will be scaled down to preserve the forecasted total.
Preserving the total forecasted spend is most useful when you are confident of your spending predictions. DealTrack will automatically adjust its forecasts based on the actual spends that have been realised so that your total is met.
Under Reports, there is a forecast earnings report.
It is possible to run a report to see forecast earnings at a higher level. However, the earnings can be broken down in a number of ways including per Supplier, Scheme, or Deal. It is also possible to report by the forecasting period or the phasing period. You can also view a deals forecast inside a scheme by clicking on ‘View Forecast’ when you have a deal selected.
- Forecasting period - the period over which you would like to report your forecasts. You are able to run forecast earnings reports over the forecasting period;
- Phasing period - the time period granularity that will be used to represent seasonality in forecasts;
- Subset of forecasting period - a granularity setting, which allows you to set what level you want to manage your seasonality, e.g. forecasting period may be a year and the phasing period is monthly. Therefore, you manage seasonality monthly but forecast and report yearly;
- Phasing - the relative magnitude of expected turnover in each phasing period;
- Default phasing - a phasing profile that is managed per trading partner or per client division that acts as the default until it is overridden by a user.
If you are interested in the forecasting module, please speak to your Customer Success Manager.