Your Forecast Is Wrong by Millions, But You Just Don't Know It Yet
A forecast can reconcile perfectly, pass review and still describe a commercial position the business has already moved away from.
Forecasts can look reliable because they are built from approved budgets and committed purchase orders, with input from the business, reviewed at month end and reconciled without issue. The problem is that the position behind those numbers can change as a third-party services engagement develops.
Forecast accuracy is already a significant priority for Finance. Gartner's survey of more than 200 CFOs found that 51% ranked improving financial forecast accuracy and quality among their top five priorities for 2026.
Forecasts Are Built on What Was Approved
Most third-party services spend figures in a forecast begin as approvals, and an approval records what the organisation intended to spend at a particular point in time rather than what it is committed to today.
Between those two points, scopes are revised, phases are extended, additional workstreams are agreed and suppliers adjust how they deliver. Where those changes are not captured against the engagement as they happen, the forecast continues to describe the engagement as it was originally defined rather than as it is being delivered.
A forecast built this way can be internally consistent and still be significantly wrong. This means the numbers add up, but the underlying commitment has changed.
The Real Question Is How Long It Takes to Find Out
If a major engagement started to drift months down the line, when would Finance know?
In most organisations the answer involves an invoice that does not match expectations, a purchase order (PO) that needs increasing, or a question raised at quarter end. These are lagging signals that arrive after the commitment has already been made, leaving Finance explaining a variance rather than anticipating one.
With third-party services, a scope change, extension or additional work may only become visible once it reaches an invoice or requires a budget adjustment. By then, the financial position has already changed.
The time between a position changing and that change becoming visible is where forecast accuracy is lost, and in services engagements that period can be measured in months or years.
Supplier Delivery Is Rarely Reflected in the Numbers
Scope and cost are only part of the exposure, as supplier delivery carries financial risk of its own, and it is rarely represented in the forecast in any form.
If a significant supplier failed next quarter, would that register as an operational issue or a financial one? Answering that requires knowing which engagements depend on that supplier, what has been committed against them, how much work remains outstanding and what it would cost to place that work elsewhere.
It can also hide differences between suppliers, as two suppliers may be charging similar rates, while the outcomes, delivery and value associated with their engagements are very different. If that information isn't connected to the commercial position, Finance may have little visibility of the difference.
Deloitte's Global Third-Party Risk Management Survey found that 19% of organisations estimated their financial exposure to a major third-party incident at $500 million or more, with 11% estimating exposure above $1 billion. These figures relate to third-party risk more broadly rather than third-party services specifically, but they illustrate the potential financial scale of external dependencies.
For services engagements, this information may sit across departmental records, outdated processes and individual knowledge, making it difficult to assemble when it is needed.
Confidence Comes from Current Information
Improving forecast accuracy in third-party services is less about reviewing the forecast more often and more about keeping the information beneath it current and visible. Variations, extensions and additional work need to reach the commercial position when they are agreed rather than when they are invoiced.
Every forecast is an estimate, but Finance needs to know how much of the position has changed since it was built, what has changed and whether those changes are likely to affect the numbers before they become visible through the forecasting process. For third-party services, that means having a current view of scope, commitments, variations, extensions and supplier delivery, rather than relying on information that only becomes visible when something needs to be invoiced or explained.
This is where Services Procurement Systems (SPS) fit in, by connecting the information held across the services engagement lifecycle with the commercial position so that Finance has a clear and consistent view of what has changed and what those changes mean financially.