Learn how rolling forecasts can help your finance department and management prepare for the uncertain times ahead.
What is a Rolling Forecast?
A rolling forecast is a continuous forecast that uses future predictions to re-forecast for your upcoming year. It updates actuals as they are acquired and edits forecasts for a set time-horizon (ie:12 months). Rolling forecasts allow you to always stay focused on the future rather than focusing solely on the current calendar year. They are flexible, dynamic, and actively adjust to changes in the company and their surroundings.
The Benefits of a Rolling Forecast
A rolling forecast utilizes real data sets and their changes to update predictions for future use. Regular forecasting is done within the year and does not take into account forward-looking (the times occurring past your fiscal year) changes in the business, economy, and more. No matter what occurs, the prediction time horizon stays the same. Rolling forecasts work on updated business drivers that take into account more time periods assisting management with decision making. Historically a challenging feat, these forecasts take into account key drivers to create a 360-degree view of the business for updated decision making.
More Accurate and Agile
It is difficult to gather analytics from endless spreadsheets and data. Budgets are based on assumptions, and actuals making them difficult and time-consuming to gather, negotiate, and compare amongst different submissions. Rolling forecasts, however, focus on key points providing a more accurate and agile look into the company. When looking at the bigger picture, these key points - or business drivers - are the inputs and activities that drive managements’ decision making.
Business drivers change within every company and consist of everything from the number of salespeople to the amount of website traffic expected. Simply put, drivers are what the management are looking at and need to understand. Normal forecasting and budgets are time-consuming, where the majority of hours are wasted on line-items and their accuracy - information that is vital however not easy to gather insights from. It takes looking at them as a whole to truly derive real actionable information. Rather than focusing on small, individual line-items, rolling forecasts are agile and take into account key drivers, while updating them simultaneously, for more efficient decision making.
Easier Than it Seems
With 2020 throwing curveballs at companies like never before, the popularity of rolling forecasts has truly skyrocketed. No company could have accurately predicted our current economic landscape and it is crystal clear that these forecasting processes require sprucing-up. Without a financial analytics platform or business planning software, this process would be challenging to accomplish.
This rolling forecast, as always, is created on Excel similar to any other forecast. Its achilles heel is crafting insights out of the numerous Excel spreadsheets that your department is fraught with once the process is over.
New Methods of FP&A
Here are two software types that are making waves in the industry, one that works with your existing forecast spreadsheets and another that allows you to move away from Excel altogether. They both can provide the future-looking answers you require and will allow you to move your finance operations forward.
DataRails is a financial analytics platform that works with a company’s existing infrastructure, even Excel spreadsheets. DataRails’ software is easy to implement as it integrates with existing systems to deliver valuable results. Their platform can deep-dive into your rolling forecasts for comparisons, analyses, and provide valuable insights. Software types such as this, not only bring value to FP&A professionals within a company but also to other key players regardless of their role or department.
Another method to change your FP&A processes in their entirety is to incorporate software such as Axiom. Axiom enables finance professionals to link market and operational drivers to financial results and improve organizational decision making. Shifting your finance operations from outdated methods to their state-of-art dashboard can increase organizational performance and assist in creating outstanding outcomes across an organization.
Regardless of the right solution for your business - it is clear that it is time for a new way to go about financial planning and analysis. Rolling forecasts not only predict but are the future! Roll your forecasting methods into the future and adopt the future thinking mentality and software today.