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How can you identify risks and opportunities with Rolling Forecast Techniques?

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Rolling forecasts are a dynamic and flexible way of planning and managing your business performance. They allow you to update your assumptions and projections based on the latest data and market conditions, and to adjust your actions accordingly. But how can you use rolling forecasts to identify risks and opportunities for your business? In this article, we will explore some techniques and best practices to help you do that.

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1 Define your forecast horizon

The first step to using rolling forecasts effectively is to define your forecast horizon, or how far ahead you want to look. Depending on your industry, business model, and strategic goals, you may choose a shorter or longer horizon, or a combination of both. For example, you may have a 12-month rolling forecast that updates every month, and a 3-year rolling forecast that updates every quarter. The shorter horizon helps you monitor your operational performance and cash flow, while the longer horizon helps you align your strategic initiatives and investments.

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Dr. Mumkesh Awasthi

Head of Sales Enablement, Operations & Intelligence | Driving Business Growth through Innovative Technology Solutions
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We can always look at 12month horizon for a rolling forecast, however best it works on a month on month basis and it truly depends on the nature of work. - Forecasting is a technique and it is a mandatory steps of the process as it forces you to think continuously and help you plan things effectively. - Helps you keep a track of orders, potential orders, inventory and maturity in pipeline

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Arvind Mishra

Director of Finance || Leadership Team Member || Driving Financial Excellence and Growth||On a Mission to Spread Financial Literacy
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In my experience, having a three-year plan with a monthly rolling forecast of 12 months helps. However, depending upon the nature of activities a business might want to do a little closure and have a close look at the weekly rolling forecast as well especially for cash flows. This helps to monitor your performance effectively.

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2 Identify key drivers and assumptions

The next step is to identify the key drivers and assumptions that affect your forecast. These are the variables that have the most impact on your revenue, costs, profitability, and cash flow. For example, some common drivers and assumptions are sales volume, price, market share, customer retention, cost of goods sold, operating expenses, interest rates, exchange rates, and inflation. You should also consider external factors, such as industry trends, customer behavior, competitor actions, regulatory changes, and economic conditions.

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Dr. Mumkesh Awasthi

Head of Sales Enablement, Operations & Intelligence | Driving Business Growth through Innovative Technology Solutions
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Other than what is mentioned as key drivers here in the post, i would want to highlight below as well - - CRM management - Inventory Management - Order Book (in Hand) - Historical Trends - Availability of stocks from Vendor, in case you are in such a business

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3 Establish a baseline and scenarios

Once you have identified your key drivers and assumptions, you need to establish a baseline forecast, which is your best estimate of what will happen based on the current data and information. This is your reference point for measuring your actual performance and variance analysis. However, since the future is uncertain and dynamic, you also need to create scenarios, which are alternative forecasts based on different assumptions and outcomes. For example, you can create a best-case scenario, a worst-case scenario, and a most-likely scenario, and assign probabilities to each one.

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4 Monitor and update your forecast

The final step is to monitor and update your forecast regularly, based on the new data and information that becomes available. This is where you can identify risks and opportunities for your business, by comparing your actual performance with your baseline and scenarios, and analyzing the causes and effects of the variances. You can also use sensitivity analysis, which is a technique that shows how your forecast changes when you adjust one or more drivers or assumptions. This can help you evaluate the potential impact of different decisions and actions on your business.

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Dr. Mumkesh Awasthi

Head of Sales Enablement, Operations & Intelligence | Driving Business Growth through Innovative Technology Solutions
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Rolling forecast needs to be updated regularly and it works best when you do it each month and then break the months into weeks. It helps business/sales team to brainstorm thoroughly and forces them to re-think. And start publishing monthly forecast week on week, vs actuals week on week

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5 Communicate and collaborate with stakeholders

A rolling forecast is not only a tool for planning and managing your business performance, but also a tool for communicating and collaborating with your stakeholders. These are the people who are involved in or affected by your business, such as your managers, employees, customers, suppliers, investors, lenders, regulators, and partners. You should share your forecast with them regularly, and solicit their feedback and input. This can help you improve the accuracy and relevance of your forecast, as well as align your expectations and goals with them.

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Dr. Mumkesh Awasthi

Head of Sales Enablement, Operations & Intelligence | Driving Business Growth through Innovative Technology Solutions
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Forecasting only works when there is a regular communication engine is set-up with stakeholders as they are close to customers, vendors, markets and hence having a month cadence around forecast is must have as part of your process. Market keep on changing, new challenges would come, customer situation may change every month.

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6 Use technology to support your rolling forecast

One of the challenges of using rolling forecasts is to collect, process, and analyze the large amount of data and information that is required. This can be time-consuming and error-prone, especially if you use manual or outdated methods, such as spreadsheets and paper reports. To overcome this challenge, you should use technology to support your rolling forecast, such as cloud-based software, data integration, automation, dashboards, and analytics. This can help you streamline your workflow, reduce your workload, increase your efficiency, and enhance your insights.

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7 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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How can you identify risks and opportunities with Rolling Forecast Techniques?

1

2

3

4

5

6

7

1 Define your forecast horizon

2 Identify key drivers and assumptions

3 Establish a baseline and scenarios

4 Monitor and update your forecast

5 Communicate and collaborate with stakeholders

6 Use technology to support your rolling forecast

7 Here’s what else to consider

Budgeting & Forecasting

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How can you identify risks and opportunities with Rolling Forecast Techniques?

1

2

3

4

5

6

7

1 Define your forecast horizon

2 Identify key drivers and assumptions

3 Establish a baseline and scenarios

4 Monitor and update your forecast

5 Communicate and collaborate with stakeholders

6 Use technology to support your rolling forecast

7 Here’s what else to consider

Budgeting & Forecasting

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