How can you improve profitability with rolling forecasts?

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Rolling forecasts are a powerful tool for improving profitability in corporate finance. They allow you to adjust your plans and actions based on the latest data and market conditions, rather than relying on outdated or inaccurate assumptions. In this article, you will learn how to use rolling forecasts to optimize your cost management and profitability analysis, and achieve your financial goals.

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Imane Haouassia
Steel Qian

CFO of Biotech Company
Guilherme Henrique .'.

Administrador, Perito Judicial e Consultor Empresarial

1 What are rolling forecasts?

Rolling forecasts are a type of financial planning that updates your projections on a regular basis, usually monthly or quarterly, by adding new periods and dropping old ones. For example, if you have a 12-month rolling forecast, you would update it every month by adding a new month at the end and dropping the first month. This way, you always have a 12-month view of your expected performance, revenue, expenses, cash flow, and other key metrics.

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Steel Qian

CFO of Biotech Company
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Profitability is not improved by rolling forecast in the end. Instead, rolling forecast helps to identity the gap between actual and target and enable the management buffer time to respond to the unfavorable change and maximize favorable trends. Most important of all, the acceptance of rolling forecast implies the influence of finance in the organization, as it says: you get what you measure.

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Guilherme Henrique .'.

Administrador, Perito Judicial e Consultor Empresarial
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A previs?o contínua é a extens?o de um Rolling Forecast. é uma Ferramenta Essencial que pode ser aprimorada juntamente com o or?amento anual e o Plurianual. Com ela a empresa é capaz de se antever a situa??es de exercícios futuros adequando seu curso e suas atividades internas para que os desafios e adversidades n?o sejam t?o impactantes.

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2 Why are rolling forecasts important?

Rolling forecasts are important because they help you to align your strategy with the changing reality of your business environment. They enable you to respond quickly and effectively to new opportunities, threats, and trends, and to adjust your resources and priorities accordingly. They also help you to communicate your vision and expectations to your stakeholders, such as investors, lenders, customers, and employees, and to gain their trust and support.

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Lucilla Canella

Analista de Planejamento Financeiro Sênior | FP&A
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Sem dúvida essa é a maior vantagem do Rolling Forecast, a possibilidade de fazer ajustes de maneira mais rápida e eficiente nas estratégias financeiras, porque o plano or?amentário está em constante revis?o, a desvantagem é que se perde o plano or?amentário original, o que pode impactar em um menor engajamento por parte dos gestores para se atingir as metas, já que est?o sempre mudando.

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Guilherme Henrique .'.

Administrador, Perito Judicial e Consultor Empresarial
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As previs?es contínuas s?o de suma importancia para a gest?o do médio/longo prazo do negócio pois com elas é possível adentrar em cenários do exercício seguinte, e com tais proje??es a empresa é capaz de adequar seu curso e suas atividades internas bem como direcionando esfor?os para se preparar para futuras adversidades.

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Deanne Corris, CMA, CSCA, MBA

Financial Leader Specialized in Optimizing Strategic and Operational Goals/End-To-End Project Management & Complex Problem Solving
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Rolling forecasts provide continuous, up-to-date insights that enhance decision-making and ensure financial plans align with current business strategies. This ongoing process allows for quick responses to trends, opportunities, and threats, maintaining organizational agility in a dynamic market.

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3 How can you implement rolling forecasts?

To implement rolling forecasts, you need to have a clear and consistent process, a reliable and flexible data source, and a collaborative and accountable culture. To start, you should define your objectives and scope - what are the main drivers and outcomes of your profitability? Then, establish your assumptions and scenarios - what external and internal factors affect your profitability? After that, build your forecast model and templates - what are the key inputs and outputs of your forecast? Finally, perform your forecast analysis and reporting - how do you compare your forecast with your actual results and budget? Through these steps, you can ensure consistency and accuracy of calculations, present the forecast to stakeholders, and use it to support decision making.

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Steel Qian

CFO of Biotech Company
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Implement a rolling forecast is not just putting together a game of numbers. You shall first make people believe that they do get benefits by looking at latest numbers and that you have business acumen and technical capability of delivering such a forecast. People respond to what they believe. Not until people provide finance relevant and reliable information to make such a forecast, do the same group of people appreciate the forecast result generated. So it is not technical game of finance, but how finance influence the way people manage their business and the way they understand value of finance work.

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Guilherme Henrique .'.

Administrador, Perito Judicial e Consultor Empresarial
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Uma vez que a empresa já possui a cultura da Or?amenta??o e do Rolling Forecast, as previs?es contínuas ficam fáceis de serem implementadas, uma vez que elas podem se tornar uma extens?o do rolling forecast. Elas também podem servir de base para o or?amento do ano seguinte, uma vez que elas s?o uma extens?o do cenário atual para o exercício seguinte.

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Mehran Khan

Top-tier Accounting & Finance Pro | Quickbooks Specialist | Pan Pakistan Award Winner ??
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Data is the real treasure, and the accuracy of data means you have the treasure in your pocket. The more accurate data means the more your forecasts are accurate, and I bet you as well as your company both want to have accuracy in your forecasts.

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4 What are the benefits of rolling forecasts?

Rolling forecasts can bring numerous advantages to your profitability and performance, such as enhanced accuracy and reliability by using the most recent and relevant data and assumptions. You can also become more agile and responsive by regularly updating your forecast. Additionally, you can optimize cost management and profitability analysis by aligning your forecast with your strategy and goals. Furthermore, involving stakeholders in the forecast process can result in increased collaboration and accountability, as well as a culture of transparency and ownership.

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Guilherme Henrique .'.

Administrador, Perito Judicial e Consultor Empresarial
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Justamente, as previs?es contínuas podem nos apresentar cenários desafiadores na transi??o dos exercícios, e com ela a organiza??o é capaz de antever essas adversidades, mudar o curso das atividades internas e se preparar para cenários desafiadores no médio/ longo prazo.

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Nikit Shah

FP&A Manager at Tourism 365 (ADNEC Group) | Chartered Accountant | Finance Business Partner | Commercial Finance Manager
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Imagine your business is a ship sailing through ever-changing waters. Rolling forecasts act as your real-time navigation system, constantly updating you on the best routes to maximize profits. With this approach, you can adjust your course swiftly, avoid financial storms, and ensure everyone onboard is working together towards the same destination of success.

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5 What are the challenges of rolling forecasts?

Rolling forecasts can be challenging, so you need to be aware of and overcome them. Resistance and inertia may arise due to people being used to the traditional budgeting process or fearing losing control or accountability. Additionally, some aspects of your business may be difficult or impossible to forecast due to factors or events that are beyond your control or prediction. Moreover, rolling forecasts may require more time and effort than annual or quarterly budgets as they involve more frequent and dynamic updates and adjustments. To address these challenges, it is important to have a clear vision and purpose for your forecast, strong leadership and sponsorship, a robust and scalable technology platform, and a continuous improvement and learning mindset.

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Guilherme Henrique .'.

Administrador, Perito Judicial e Consultor Empresarial
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Em alguns segmentos é mais fácil prever o que ocorrerá daqui a 12 meses do que o que vai ocorrer na semana que vem. Cada modelo de negócio possui sua complexidade de gest?o. o Ideal neste quesito é manter a equipe sempre preparada e atualizada com as principais práticas de mercado bem como manter a equipe alinhada e engajada com os valores e ciente das atividades da organiza??o.

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Harish Chandrasekaran

Head of Finance at Datatracks (Tech enabled Financial Services Co.)
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Well designed data flow between various reporting layers across order to cash, hire to retire, procure to pay & record to record processes can enable semi automated rolling forecast. Such seamless data flow coupled with collaborative options among stakeholders can significantly improve the effectiveness of rolling forecasts and make the entire process more consistent and timely.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Imane Haouassia
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Rolling forecasts are a powerful tool for improving profitability, BUT, their effectiveness depends on the quality of the data, the analytical tools used, and the strategic decision making processes in place. Here are some tips to consider: 1. Implement forecasting software to streamline the process to improve accuracy and gain insights through data analytics. 2. Ensure that the forecasting process involves input from various departments (sales, marketing, operations...) for a holistic view of the business (this one is VERY important). 3. Use each forecasting cycle to refine assumptions, improve methodologies and learn from past results to enhance future accuracy and decision making.

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How can you improve profitability with rolling forecasts?

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1 What are rolling forecasts?

2 Why are rolling forecasts important?

3 How can you implement rolling forecasts?

4 What are the benefits of rolling forecasts?

5 What are the challenges of rolling forecasts?

6 Here’s what else to consider

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