4 Advanced Ways to Use ChatGPT for Better Financial Forecasting
Generative AI technology like ChatGPT can really help with the business planning process. In other posts, we’ve talked about how you can use ChatGPT to help write your business plan and how AI can assist with financial forecasting.
Beyond basic budgeting and forecasting help, ChatGPT offers some advanced features that can help you figure out your business numbers. In this post, we will discuss these advanced features and guide you through how to leverage them for more comprehensive and accurate financial forecasts.
Advanced feature 1: Trend analysis
ChatGPT is capable of identifying and analyzing trends within your historical financial data— which can be crucial in generating accurate forecasts. To do this, provide the AI with historical data and specifically, ask it to conduct a trend analysis.
Example prompt:
Be sure to review the output from ChatGPT before adopting the new forecast. You’ll want to make sure it makes sense and do manual fine-tuning where necessary. You may also want to adjust your target growth based on planned marketing activities and other changes to your market that you may know about but that ChatGPT does not.
Advanced feature 2: Scenario planning
ChatGPT can help you explore various scenarios and their potential impact on your financial forecast. By providing different assumptions and conditions, you can evaluate how your financials may be affected under various circumstances.
Example Prompt:
Use these scenarios to help plan your strategy should any of these scenarios become a reality. For example, if profits increase, how will you reinvest in your business? Will you make changes to your headcount? Or amp up spending on marketing strategies?
Advanced feature 3: Sensitivity analysis
Sensitivity analysis helps you understand how changes in specific variables can impact your financial forecast. ChatGPT can perform a sensitivity analysis by varying the inputs within specified ranges—allowing you to assess the robustness of your financial projections.
A sensitivity analysis is somewhat similar to a scenario analysis, except the variety of changes is much broader and the goal is to determine how various inputs will affect the output. In the example prompt below, the goal is to explore how earnings might be affected by changes in sales, costs of goods, and expenses.
Example Prompt:
Advanced feature 4: Industry benchmarking
ChatGPT can provide industry-specific insights by comparing your financial data with industry benchmarks. This feature allows you to gauge your business’s performance relative to competitors and identify areas of improvement.
Example Prompt:
A word of warning on this last advanced feature: It’s not clear where ChatGPT gets industry benchmark data from, so take any information that it provides you with a very large grain of salt.
Improve your ability to forecast with ChatGPT
By leveraging ChatGPT’s advanced features, you can build more robust and comprehensive financial forecasts. These features allow you to explore various scenarios, perform sensitivity analyses, and benchmark your performance against industry standards.
As you become more adept at using ChatGPT, you can fine-tune your prompts to harness the full potential of this powerful AI tool, enabling you to make more informed decisions for your business’s future.
If you’re just getting started with financial forecasting, check out our article on using ChatGPT to help with creating an initial forecast. A good forecast is a crucial component of any business plan, and ChatGPT can provide a good helping hand for that process.
That said, ChatGPT isn’t the ultimate tool for financial forecasting. It’s best used as a helper, rather than the place to keep all of your numbers. Spreadsheets and dedicated planning and sales forecasting tools are still better options to keep your numbers up to date and analyze your performance compared to your plan.
Noah Parsons
Before joining Palo Alto Software, Noah Parsons was an early Internet marketing and product expert in the Silicon Valley. He joined Yahoo! in 1996 as one of its first 101 employees and become Producer of the Yahoo! Employment property as part of the Yahoo! Classifieds team before leaving to serve as Director of Production at Epinions.com. He is a graduate of Princeton University. Noah devotes most of his free time to his three young sons. In the winter you'll find him giving them lessons on the ski slopes, and in summer they're usually involved in a variety of outdoor pursuits. Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan.
