How can forecasting help to fine-tune your AWS monthly budget?
The word "forecast" typically brings to mind weather predictions that have evolved through sources like snippets on television, newspaper columns, or the very popular, "Alexa, what's today's weather?" However, a financial forecast is something very different.
Imagine planning an outdoor picnic because you felt that the weather was pleasant. To your surprise, while having food, the weather changed and it started raining heavily. Drenched and tired, you check the weather forecast just to realize that heavy rain was predicted. Wouldn't it have been better if you'd checked the weather forecast earlier and made changes to your plan? It's always better to be prepared for unforeseen twists and turns in everyday life, and the same can be said for business entities.
With more businesses shifting to cloud platforms, efficient management of resources and finances is a major challenge. Unexpected expenses, uncertainties in market demand, pressure to adopt evolving technologies, and skyrocketing cloud bills call for more flexible responses to making sudden changes and more dependency on predictions to avoid last-minute surprises that can hamper your entire financial plan. What if someone could predict an estimated bill value based on your previous usage, demands, or trends way before the billing day? These predictions can help you prepare and take necessary precautions like restructuring your asset allocation, reducing overall spending, and ensuring that you're not crossing targets—and this is exactly what financial forecasts do.
Financial forecasts predict an estimated monthly bill amount in the middle of the month based on your previous usage and historical data. Like how a weather prediction can help you change your plans or remind you to take an umbrella to protect yourself from the rain, a financial forecast can help you make changes in the amount of money to be spent, rightsize resources, or take other measures to keep the bill within the monthly target.
For business units (BU), financial forecasts give an idea of the team-level split-up in spending, helping them make changes in allocation. BUs can use responsibility accounting or chargebacks to track team-wise spending and identify the factors that ballooned the expenses—like how the origin of a tornado or cyclone is predicted—which helps implement precautions to avoid a huge loss.
In short, a financial forecast is a compass that can help you navigate in the right direction by cutting down superfluous expenses and investing them in expanding your business.
Like weather forecasts, financial forecasts can be inaccurate. Still, you can use them as a guideline to save yourself from rain showers or chilly days and improve your financial management.