How can you create a rolling forecast for your business?

2 Choose your forecast drivers

The next step is to identify the key drivers that influence your business performance and determine how you will measure and forecast them. Drivers are the variables that affect your revenue, costs, and cash flow, such as sales volume, price, margin, headcount, capital expenditure, and working capital. You can use historical data, industry benchmarks, market trends, and assumptions to estimate your drivers for each period of your forecast horizon. You can also use different scenarios, such as best case, base case, and worst case, to capture the range of possible outcomes and risks.

3 Build your forecast model

The third step is to build a forecast model that links your drivers to your financial statements, such as income statement, balance sheet, and cash flow statement. A forecast model is a spreadsheet or software tool that calculates your financial performance based on your drivers and assumptions. You can use formulas, functions, and references to create a dynamic and consistent model that automatically updates your financial statements when you change your drivers or assumptions. You can also use charts, tables, and dashboards to visualize and analyze your forecast results.

4 Review and update your forecast

The final step is to review and update your forecast on a regular basis, usually every month or quarter, to incorporate the actual performance and new information into your model. You can compare your actual results with your forecast results to identify the variances and understand the reasons behind them. You can also adjust your drivers and assumptions to reflect the current and expected market conditions, operational challenges, and strategic opportunities. By doing so, you can improve the accuracy and relevance of your forecast and make better decisions for your business.