What are the best practices for implementing rolling forecasts in nonprofit organizations?

1 Benefits of rolling forecasts

Rolling forecasts can help nonprofit organizations improve their financial performance, accountability, and decision-making. This strategy can enhance visibility and transparency into the organization's financial situation and performance indicators, such as cash flow, revenue, expenses, and impact. Additionally, it reduces the time and effort spent on annual budgeting cycles which can be cumbersome and prone to errors. Rolling forecasts can also increase the flexibility and agility of the organization to respond to opportunities or changes in funding, demand, costs, regulations, or external events. Moreover, it can foster a culture of collaboration and learning among staff, board, and stakeholders as they review and revise the forecasts together.

3 Best practices for rolling forecasts

To make the most of rolling forecasts, nonprofit organizations should align them with their strategic plan and prioritize engaging staff, board, and stakeholders in the forecasting process. It's important to simplify the process, focusing on key drivers and indicators that matter for their mission and vision. Additionally, forecasts should be reviewed and revised regularly to incorporate new data, assumptions, and scenarios. Lastly, they should be communicated and reported clearly using visual aids to highlight the main insights and implications.

4 Challenges and pitfalls to avoid

Rolling forecasts can present certain challenges and pitfalls that nonprofit organizations should be aware of. Resistance to change from traditional budgeting to rolling forecasting is a common issue, as is overcomplicating or overloading the process with unnecessary details. Additionally, isolating or siloing the forecasting process, neglecting or ignoring actual performance or feedback, and misusing or misinterpreting the forecasts can all lead to inaccurate results. To ensure success, it is important to involve and communicate with relevant people and departments, stick to realistic forecasts, and treat them as dynamic estimates or ranges rather than fixed targets or commitments.

5 Examples and resources

To learn more about rolling forecasts and how to implement them in nonprofit organizations, there are several resources available. The Nonprofit Finance Fund provides a guide, template, and webinar on creating and using rolling forecasts. The Bridgespan Group shares a case study on how a nonprofit organization used rolling forecasts to manage the COVID-19 crisis and improve their financial resilience. The Association of Chartered Certified Accountants offers a report on the benefits and challenges of rolling forecasts, as well as tips and recommendations. Additionally, the Chartered Institute of Management Accountants provides a toolkit with best practices and examples for designing and implementing rolling forecasts.