Mid-January urged as true start for UK Q1 forecasts

Kaleidoscope.com has requested UK businesses to revisit their Q1 plans in mid-January, arguing that forecasts built in December and early January often rely on trading data that does not reflect normal conditions.

David Smith, Principal Solution Architect at Kaleidoscope.com, said many leaders set budgets and Q1 forecasts before they can see the full effect of holiday trading, returns, late payments and supplier costs. He pointed to a single day in January when finance teams can review more complete information.

"Every SME, scale-up and finance leader recognises the frustration of building a Q1 forecast that starts to unravel almost immediately," said David Smith, Principal Solution Architect, Kaleidoscope.com. "It's one of the most predictable problems in business planning, yet it happens every single year. The reality is that most forecasts created in December are already wrong before January even begins."

December distortion

Smith said December performance can skew planning assumptions. He cited discounting, disrupted supply chains and changes in consumer behaviour around the holiday period. He also highlighted the delayed invoicing and payment patterns.

"December hides the truth," said Smith. "Holiday sales can artificially inflate revenue, while payments and invoices often don't clear until early January. Consumer behaviour then snaps back sharply in the second week of the month, when returns, cancellations and no-spend resolutions take effect. When you put all of that together, mid-January, not 1 January, is the real beginning of the financial year."

Smith argued that mid-January offers clearer insight into post-holiday trading conditions and cash positions. He said this point arrives once businesses see the volume of returns and cancellations, alongside the timing of payments, supplier invoices and payroll-related adjustments.

He identified Thursday, 15 January, as the point when many organisations have visibility across key inputs. These include holiday sales performance, return rates, failed payments, supplier invoices, payroll adjustments and cash flow.

"By the middle of January, month-end is complete, and the scramble to hit targets has not yet begun," said Smith. "It's a brief window of clarity, and most businesses don't take advantage of it."

Rolling forecasts

Smith linked the timing issue to the mechanics of forecasting. He said many organisations still treat forecasting as a periodic exercise rather than a continuous process. He also cited barriers to more frequent updates.

The company pointed to research indicating that only around 25 percent of companies globally practise rolling forecasting. It attributed the slow uptake to spreadsheet-based processes that can take significant manual effort.

"Leaders understand the value of rolling forecasts, but their tools are working against them," said Smith. "If updating a forecast takes days of manual effort, version-control headaches and endless consolidation, it simply doesn't happen often enough."

Kaleidoscope.com also cited figures suggesting around 70 percent of CFOs still rely heavily on Excel for core financial planning. Smith said fixed annual budgets and siloed data often leave decision-makers working with outdated information.

"The result is that businesses are making decisions using numbers that no longer reflect reality," said Smith.

What to review

Smith positioned mid-January as a practical re-forecasting point. He said leaders should revisit several areas that can materially change Q1 performance once holiday trading has washed through operational systems and bank accounts.

He highlighted return rates as a driver of revenue adjustments in January. He also pointed to inventory positions after the peak season, including the risk of over-stocking. He said marketing performance often shifts in early January, with changes in CPCs, CPAs and conversion rates.

Smith also identified cash flow as an area that becomes clearer once December invoices and late payments become visible. He included headcount costs, including updated pension, NI and employer contributions.

"These are the operational realities that determine how Q1 will actually unfold," said Smith. "Ignoring them doesn't make the risk go away."

Smith argued that more frequent updates reduce the burden of major revisions later. He said teams can apply more detail to the near term and rely on broader assumptions further out.

"When forecasts are updated regularly, leaders can focus in detail on the next month, while using lighter assumptions further out," said Smith. "That's how planning becomes a decision-making tool, rather than a static document."

"National Re-forecasting Day is about recognising that clarity comes from timing" Smith says. "For most businesses, the year doesn't truly begin on 1 January. It begins when the numbers finally tell the truth."